The good news? France and Germany seem to be in agreement. The bad news? They agree Europe needs more belt tightening so that bankers can get more relief.

The leaders of France and Germany, reportedly, are discussing ways to compel European nations to have a common fiscal policy without resorting to the cumbersome process of amending the EU treaty. This was enough to reassure stock markets for the moment, which are nothing if not subject to herd instincts.

But who are we kidding here? More austerity may appease the bankers’ need for their pound of flesh, but it will only make the Great Deflation worse. A common fiscal policy is a good idea, but one biased towards austerity is exactly the wrong medicine

As many of us have been hoping and praying, the Super Committee fell of its own weight, making room for a much better debate about where budget cutting fits into a recovery strategy (if at all), and how to raise taxes progressively in order to finance the investments and jobs that America needs.

President Barack Obama was unwise to make this devil’s bargain in the first place; he has since moved on to emphasizing jobs and recovery. The Super Committee crack-up should be the last gasp of the “bipartisan” folly about deficit reduction as key to recovery—which the president himself gave a big boost with his appointment of the late Bowles-Simpson Commission.

With the Super Committee near collapse, will the Democrats snatch defeat out of the jaws of victory? Republicans, by locking themselves into no new taxes at a time when two-thirds of Americans prefer to tax millionaires instead of cutting Social Security and Medicare, are in a nice pickle.

Over the weekend, Republicans on the Super Committee proposed to trade about $300 billion in net revenue increases for more than $2 trillion in permanent tax cuts. Democrats, mercifully, did not take the bait.

Just when you think the right can’t stoop any lower, they keep surprising you. Karl Rove is out with an ad linking Massachusetts Senate candidate Elizabeth Warren with … Che Guevara.

Over footage of an out-of-control protest, including a Che T-shirt, an announcer intones that Warren sides with protesters who “attack police, do drugs, and trash public parks.” Warren is quoted—out of context, of course—as saying that she “created much of the intellectual foundation for what they do.”

With the Congressional Super Committee required to produce a bipartisan budget-cutting plan by November 23, the best possible outcome would be for the committee to collapse of its own weight.

With no deal, automatic cuts would kick in beginning in 2013. Those budget cuts would be excessive, but that question could—and will—be reopened after the election. And in the meantime, $4 trillion in Bush tax cuts will expire, solving most of the deficit problem.

If Democrats win, it’s all up for grabs. If Republicans win, the cuts will be even deeper.

The 2012 election will be a referendum on whether we want growth or austerity, and whether we want tax fairness.

The astounding thing about the collapse of Jon Corzine’s gambling venture, MF Global, is the revelation that his bets were leveraged at about 40 to 1. This is like playing poker and borrowing 97 percent of your stake. If you guess wrong on a big bet (as Corzine did), you are wiped out (as he was).

The same thing happened to Lehman Brothers.

This also shows how utterly feeble Dodd-Frank is and how little the system has changed since the collapse of 2008.

The so-called shadow banking system—outfits like Corzine’s—can still bet the house if they have a taste for risk. The only good news was that at $8 billion, Corzine’s MF wasn’t big enough to take down the system or require a government bailout. But it could have been.