Because you are so goddamned educated, do (omit this), I knew you couldn’t be very smart.
Because you are so goddamned educated, I knew you couldn’t be very smart.
Yes, it is in italics to emphasize how certain he was, as if education automatically means the person can't be smart.
This idea comes from the idea that people who have a lot of education, reading many, many books, have their minds full of ideas and theories, but are completely stumped when they are required to do something practical (like change a washer on a tap).
Subjunctive tense is not being used here.
I knew I'd (I would) catch him:knew is past tense.
He knew that if (introduces the conditional tense) he teased him, that he would be able to catch him.
Student or Learner