What Engels failed to understand was advanced capitalism's deft wielding of complexity, the cloaking of risk, the originate-and-distribute 'hot potato' model, securitization as camouflage, the democratization of credit, the false hope of counter-parties and unanticipated concentration risk, etc. Heck, who beyond a select few people understood it even nine months ago? Even now, the rationale of post-bubble fervor is hard to reconstruct. My guess is Engels would resist the anomalous language of 'bubbles' and argue that the so-called anomaly is simply the business-as-usual, crisis-to-crisis nature inherent in capitalism. He might also marvel at the financial capitalist's ability to 'feed at the socialist trough' whenever it suits him. Should we be surprised? Greed observes the ideology of expedience. Or is it that capitalism is institutionalized greed and not an ideology at all?
Anyway as the elite stole from the top via stock options, ridiculous salaries, acquiescent boardrooms etc., they simultaneously (and ingeniously) created credit models that augmented stagnant wages and sustained the workers' consumption patterns against the Marxist cul de sac of overproduction. In short, cheap credit caused the worker to believe he was still keeping ahead and enjoying the fruits of his production. For a time it masked his real wage declines.
The Freddie/Fannie paper factory also benefited from an implied govermental (read: socialist) backstop which, as it turned out, was ultimately invoked; this aggressive credit creation relied upon the gumption of relatively less sophistocated and emergent capitalist markets (many prior Marxist-Leninist states ironically) that, for a variety of currency and developmental reasons, were happy to remain production-bound and vendor-oriented.
Like any Ponzi scheme, this dog-and-pony trick can only succeeed once. No one will be fooled again. Meanwhile the American worker is being unceremoniously dumped back into a classic Marxist overproduction trap as credit sources evaporate, home equity disappears, manufacturing jobs vanish and inflation looms. The new cars and houses are stacking up. Absent credit, no one can afford them. Which is to say, no one can afford them. When the deleveraging process completes itself, we will be back to 'merely' wages --and horrendous wage disparities-- a more classic Marxist playing field.
The question to me is, when will the American pot finally boil over into meaningful social unrest? Or are Americans so naturally docile (and/or medicated) that outrage is not an available response? Is Prozac Huxley's soma? If so, they sure as hell better find a way to keep the pills rolling.