The stock market is being led by the dangerous "monetary manipulation" of the Federal Reserve's $85-billion-a-month in quantitative easing bond purchases, Jim Grant—founder and editor of Grant's Interest Rate Observer—said Tuesday, as the central bank began its final meeting of the year.
"The stock market is now a tool of Fed policy," he said on CNBC's "Squawk Box".
"What the Fed is doing is an exercise in price control. This is 'stocks.gov' [and] 'bonds.gov,'" Grant said. "The clear and present risk of the stock market is we're living ... in a hall of mirrors" because the Fed's accommodative policy is distorting the calculations by which the market has been traditionally valued.
(Read more: Is a 'panic taper' the real risk to markets?)