Merryn Talks Money – Silver Breaks Out. Oil Breaks Down. Markets Hold Their Breath.

Podcast: Merryn Talks Money
Host: Merryn Somerset Webb
Guest: John Stepek, Senior Reporter, Bloomberg
Date: December 12, 2025

Episode Overview

In this week's "Markets Wrap," Merryn Somerset Webb and John Stepek dive deep into the week’s most dramatic market moves: the spectacular rise in silver prices, the persistent slump in oil, and what these shifts signal about inflation, government policies, and looming economic challenges. The episode features humor, sharp macro analysis, and reflections on the sustainability of today’s market trends—including the potential for an AI bubble and its systemic risks.

Key Topics and Insights

1. Silver’s Meteoric Rise (Starting 02:22)

• Key Point: Silver has soared past $60/oz, a historic new high, doubling in value within the year.

• Context: Silver’s previous ceiling was $50, not seen or sustained since 1980.

• Personal Touch: John bought a silver anniversary present earlier in the year—now worth double, prompting tongue-in-cheek talk about pawning it (03:03).

  Quote:
  "Silver's just the one that keeps blowing my mind slightly, because it's never been above $50 an ounce for a sustained period of time. And now it seems to be."
  — John Stepek [03:18]

• Macro View: Silver and gold both climbing to record territory point to bigger forces at play—predominantly a persistent inflationary backdrop.

2. The Inflation vs. Deflation Debate (04:13)

• Host Take: Merryn and John both lean toward the “inflationist” camp, arguing governments cannot escape the global debt trap other than by inflating it away.

• Government Debt:

  • Politicians prefer “soft default” via higher nominal GDP (higher inflation, not necessarily higher real GDP).
  • Voters dislike high living costs, leading to political tinkering with price controls.

  Quote:
  "We’re natural inflation deflationists, aren’t we? Because we can’t see any way out of the global debt problem."
  — Merryn Somerset Webb [04:13]

• Price Controls: Policy efforts (e.g., capping ticket prices or raising minimum wage) attempt to “fix” inflation. Both hosts agree these efforts are ultimately ineffective and distort incentive structures.

  Quote:
  "One thing we do know about price controls is that they don’t work."
  — Merryn Somerset Webb [06:02]

3. Wage Controls and Productivity Challenges (06:28)

• Commentary: Rising minimum wages and benefit systems create a wage “floor” so high it in turn caps wage growth, harming productivity by muddling the reward-effort incentive.

• Implication: Institutional controls risk “baking in” inflation, making it persistent rather than transitory.

  Quote:
  "So effectively, our wage and price controls bake inflation in rather than the other way around."
  — Merryn Somerset Webb [07:12]

4. Central Banks: Independence or Illusion? (07:31)

• Observation: Increasing political pressure to keep interest rates low, particularly palpable during election cycles.

• Example: Rachel Reeves touting rate cuts as a government win; recalls similar political behavior in the US.

  • Central bank “independence” seen as “a mirage” (08:48).

  Quote:
  "Independence is really just a fig leaf."
  — John Stepek [08:50]

5. Oil’s Collapse and Contrarian Trades (09:18)

• Market Move: Oil slid from ~$80 to $60 over the year—remarkable given the inflationary context.

• Analysis: This fall has contributed significantly to headline inflation staying contained. However, a swift rebound in oil prices could be 2026’s big surprise.

  Quote:
  "One of the surprises for next year might be oil coming back more sharply than anyone expects at the moment..."
  — John Stepek [10:15]

• Tease for Next Year: An in-depth episode on the prospects for a new commodity supercycle is promised for early 2026.

6. The AI Bubble...or Not? Insights from Howard Marks (11:24)

• Discussion: Marks’ latest memo scrutinizes whether AI stocks are a true bubble.

  • Unlike previous manias, there’s skepticism alongside excitement.
  • In California, though, “people who are in the bubble are really in the bubble.” (12:16)

  Quote:
  "Notable thing he says is... in every bubble people say this time it’s different... but a small percentage of the time it is different. Maybe 20% of the time it really is different."
  — Merryn Somerset Webb [12:37]

• Key Signs:

  • AI sector now funded increasingly by debt, not just cash flows.
  • Rising private credit and opacity reminiscent of pre-2008 banking risks.

  Quote:
  "This new thing is so competitive and requires so much money that we no longer have enough cash and we’re going to go borrow a big pile of money. It’s a big change and it’s relatively recent."
  — Merryn Somerset Webb [15:10]

• Systemic Risk: Off-balance-sheet lending returns; risk of unseen contagion if things go awry.

  • “Feels as if we are nudging towards something like that [pre-2008],” John notes (15:19).

• Job Losses & ‘Tech Feudalism’:

  • AI’s potential to wipe out entire job categories feeds speculation of a future where most live on UBI under a Silicon Valley elite.

  Quote:
  "We’ll live in a kind of almost tech feudalism where you’ve got Silicon Valley millionaires and then everyone else is on Universal Basic Income..."
  — John Stepek [17:37]

7. The Gilt (UK Government Bonds) Market Calm (18:21)

• Year in Review: Despite political chaos, UK gilts remained stable; 10-year yields ended up slightly below the year’s start.

• Outlook: With the UK sporting the highest policy rate in the developed world, there’s room for cuts “if things get grim.”

  • Could bode well for bond (gilt) investors.

  Quote:
  "All the hype about the gilts market has come to nothing."
  — John Stepek [19:28]

Notable Moments, Quotes & Timestamps

• Humor on Silver Gift’s Value:
  "They've realized that silver has basically doubled since I bought that anniversary present. So now I'm wondering how I can ask her if we can pawn it." (John Stepek, 02:57)
• On Central Bank Independence:
  "Independence is really just a fig leaf." (John Stepek, 08:50)
• On Bubbles and “This Time is Different”:
  "A small percentage of the time it is different. Maybe 20% of the time..." (Merryn Somerset Webb, 12:37)
• On Tech-Driven Disruption:
  "We’ll live in a kind of almost tech feudalism..." (John Stepek, 17:37)

Main Segments & Timestamps

• [02:22] Silver’s price surge, inflation, new paradigms
• [04:13] Inflation vs. deflation, government debt strategy
• [06:28] Minimum wage, price controls, productivity risks
• [07:31] Central banks, interest rates, political pressure
• [09:18] Oil’s price drop, contrarian commodities perspectives
• [11:24] AI bubble or not? Debt risk in technology funding
• [17:38] Potential job losses and societal shifts due to AI
• [18:21] Gilts market wrap and outlook for UK bonds

Tone and Style

• Conversational, witty, insightful, and occasionally sardonic.
• Interwoven with personal anecdotes, market history, and strong macroeconomic analysis.

Takeaways for Investors and Listeners

• Commodities: Silver and gold’s remarkable run reflect inflation realities. Oil’s slump may be temporary—watch for turnarounds.
• Inflation: Government policies are increasingly interventionist, but “solutions” like wage hikes and price controls have unintended inflationary side effects.
• Central Banking: The boundary between fiscal and monetary policy is increasingly blurred.
• Markets: Watch for opaque risks in AI and technology financing; bubbles don’t always look the same.
• UK Outlook: Despite political churn, bond investors may be in for a surprisingly stable ride.