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Fed fueling century's ‘greatest bubble’: Stockman

The Federal Reserve will release its next policy statement on Wednesday, and it is broadly expected to announce an addition $10 billion reduction in quantitative easing. But for David Stockman, who memorably served as director of the Office of Management and Budget under President Ronald Reagan, the Fed's reduction in accommodative policies is coming far too late.

"I don't have any expectations at all" for what the Fed is set to announce "because I think the Fed is hopelessly lost and completely incompetent, if you want to put it starkly," as Stockman certainly did on Tuesday's episode of "Futures Now."

Read More What the Fed will do this week—and why it matters

The Fed is "a posse of academic zealots and unreconstructed Keynesians who think debt is the magic elixir, and they won't stop printing money and putting their foot on the floorboard until they really blow something up," Stockman said.


David Stockman
Douglas Healey | Bloomberg | Getty Images
David Stockman

At this point, his biggest concern is the impact that the Fed's stimulative policies have had on equities.

"I think the Fed is now inflating the greatest and third bubble yet of this century," Stockman said. "The Russell 2000, even though it's come off a little bit, is still trading at 80 time trailing earnings. That's crazy, and you can say that about many other sectors of the market."

Read More US could face a permanent slump, warns economist

So what's his preferred course of action now?

"What we need to do is get the Fed out of there, free interest rates, let the money market find the natural balance and purge some of this enormous speculation," he said.

—By CNBC's Alex Rosenberg.

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