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Trump will create complete carnage in the markets, but that's okay: David Stockman

Trump: So bad he's good?
VIDEO5:0705:07
Trump: So bad he's good?

A Donald Trump presidency would be a disaster for the markets—but that's exactly what America needs, according to a former top government official.

In a recent interview on CNBC's "Fast Money", David Stockman. the former Director of the Office of Management and Budget under President Reagan, explained why the Republican candidate will be so bad for stocks, it will actually be good.

"I think the market is underestimating why this phenomena is happening, his odds of winning and the consequences if he does," said Stockman.

Trump took a narrow lead over Democratic rival Hillary Clinton in Ohio this week, a key swing state for the election. Just this week, Trump also gave a comprehensive economic speech in which he declared he would offer up $4.4 trillion in tax cuts if elected, arguing it would boost job creation by 25 million over a decade.

However, Trump also took aim at the Federal Reserve's policies, telling CNBC in an on-air interview that Fed chair Janet Yellen should be "ashamed" of having kept interest rates so long for so long.

"The elephant in the room of American politics is the Fed," added Stockman, author of the new book, "Trumped! A Nation on the Brink of Ruin...And how to Bring it Back."

The GOP contender said "the Fed is the problem. He said the [market] is artificial, the whole thing is overvalued and that Janet Yellen should be ashamed of herself," he said. "I think he's right about that."


Janet Yellen
Getty Images

In prior interviews. the Republican presidential nominee has expressed contempt for Yellen, threatening to fire her when elected. Should that occur, it would be then that Stockman expects "total paralysis" and "carnage" throughout Washington and Wall Street.

"When the market figures out that there is a new sheriff in town and a potential new regime that isn't the Washington-Wall Street establishment that's been running things for the last 25 years I think there will be panic," said Stockman.

That panic will eventually be a positive for the U.S economy, because inevitably Stockman believes that "we have to [prick] the bubble," and "get the Fed out of the financial markets."

Stockman added that "we are at the point of an epochal change...somebody has the rip the band aid off."