In addition, a failure to continue to vigorously address the corporate governance issues of the past few years could also threaten the current boom. As I noted earlier, the efficient channeling of capital to innovators has been a critical component of past productivity booms. Fraud or dishonesty in corporate accounts increases investors’ risk, raising the cost of capital and reducing incentives for investment.
Large government borrowing to fund current consumption could also raise the cost of capital and crowd out the investment on which the current boom depends.