Speculation may do more damage to financial markets and the economy than the "fiscal cliff," Vanguard founder Jack Bogle told CNBC on Monday.
"When you think about our financial system, the role of the financial system is to direct capital to its highest and best and most profitable uses," Bogle said.
While companies raise about $250 billion a year in equity financing through IPOs and additional equity offerings, Bogle said there's $33 trillion worth of trading going on, "which is basically betting on the psychology of the markets. It makes no sense."
He proposes three ways to limit market speculation — a transaction tax, a tax on very short-term capital gains and federal rules to make certain money managers are looking out for their clients' best interest.