As many skeptics predicted, the moment the stock market began to wobble out of concern for a pull back of the Federal Reserve’s massive stimulus policy, the Fed’s new chief Janet Yellen jumped into a chair in front of a congressional committee Tuesday to assure everyone that she’s not going to deviate from the policies of Ben Bernanke, her predecessor.

Lo and behold (and yes, fairy tale language is appropriate here!), the U.S. stock market leaped up over a full percent while she was speaking before the House Financial Services Committee. It is yet another indicator that the stock market has become completely disassociated from the real economy, and is responsive only to the moves by the Fed to keep the floodgates of liquidity open to the biggest financial institutions, banks and related investors.

As commentator Mike Whitney wrote in an article entitled “Prelude to a Crash” in last week’s online Information Clearing House, “Investors have shrugged off dismal earnings reports, abnormally-high unemployment, flagging demand, droopy incomes, stagnant wages and swollen P/E ratios, and loaded up on stocks confident that the Fed’s infusions of liquidity will keep prices going higher.”

He added, “It’s only a matter of time before they see the mistake they’ve made.”

The Fed’s current stimulus policy has led to an excess of risk taking, the practice of incurring massive short-term debt to buy into the Fed’s gravy-day policies. It’s a massive growth of a debt bubble that is collateralized against only itself, but nothing grounded in the real economy.

On a global scale, the picture is even more dire, even as Wall Street investors, big banks, the Fed and Capital Hill policy makers continue to whistle in the dark.

As Morgan Stanley’s Ruchir Sharma wrote recently in the Financial Times, the biggest threat to the stability of the global monetary system is the debt bubble that has built up in China.

China, yes China, as Sharma underscored in an interview on Fareed Zakaria’s weekly show on CNN, now contributes more to global growth than the U.S. Whereas its share in global growth was 10 percent in 1999, compared to 33 percent for the U.S., it has swollen to 36 percent in 2013, while the U.S. share has shrunk to 19 percent.

Accomplished through incredible seven-to-eight percent annual growth in their gross domestic product (GDP) in recent years, China’s debt as percentage of GDP has grown from 135 percent in 2000 to 231 percent in 2013. Another way of seeing the problem is this: from 2002-2008, it took $1.4 in debt for China to produce $1 in growth, but in the 2009-2013 time frame, it has cost China $3.4 in debt to generate $1 in growth.

Therefore, China’s zeal to continue seven or eight percent annual GDP growth is running up against a very troubling reality. If the country were forced to slow down to even four or five percent annual GDP growth, the consequences for the rest of the world, with its increasing dependency on China, would be “seismic.”

The inefficient growth of debt is at the heart of the impending crises for both the U.S. and China. It’s the same scenario that led to the crash of 2008. We are looking down the barrel of a massive repeat, orders of magnitude bigger, than 2008.

The problem has been the political and policy disconnect between the accumulation of debt to buy into stimulus programs – either in the U.S. or in China – and the pressing needs of the real economy to have access to that capital.

All the data shows that little or nothing of the Fed stimulus is “trickling down” to strengthen the middle class, improve a crumbling national infrastructure or provide for a sustainable job-creating industrial-grounded economy.

On the contrary, mega-banks like Wells Fargo, who are feeding at the trough of the Fed stimulus, are not only reticent to lend to small businesses, but are using their Fed-backed muscle to ravage them, as I have witnessed first hand. Buoyed by the Feds, Wells Fargo in the Washington, D.C. area, for example, has decided to call in small business loans for no other reason than because it can.