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Investments / The Ticker

Here's what will cause the next recession

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While we're worried about the knock-on effects of the government shutdown -- how can we verify tax information from the IRS? -- the real problem may be further ahead.

The U.S. Treasury has said it's set to run out of cash on Oct 17, and if that happens, some economists say we'll have a recession to contend with.

A number of economists painted a pretty bleak picture for CNN, with roughly half characterizing a recession as "unavoidable" if the U.S. defaults later this month:

"Financial markets are already being impacted in the short-run as a result of heightened uncertainty," said Sean Snaith, director of the Institute for Economic Competitiveness at the University of Central Florida. But he said there would be greater long-term damage due to the spending cuts that would occur.

"The fiscal shock treatment of having to eliminate the deficit in one fell swoop would reduce GDP by more than 5% and cause a severe recession," he said.

So how likely is the U.S. to default? A separate CNN story won't engender a ton of confidence: investors are already betting it will happen.

Source: CNN
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