What's "paper", again? stocks?
I think most of the time they're talking about "futures" and "options", but I think you can actually buy "shares" of silver, but what you actually get is a piece of paper that says you have a right to own silver.
This methodology was largely invented by the Rothshilds, where they will issue much more "paper" than they have actual silver to back it up, but originally for them it was gold.
So let's say various people put one million of gold on deposit with the Rothschilds to put in a vault. Depositor will get a certificate (paper) that says redeemable for one million dollars (or whatever currency). But then another guy comes along and wants a one million dollar loan from Rothschild. So Rothschild will give him a paper for one million dollars, which he can then use wherever people accept Rothschild paper, but then another person comes asking for another million. Rothschild give him another note for one million, knowing that there's now two million in notes out there but only one million in physical gold to back it up. At some point, Rothschild has $20 million of "notes" (paper) out there but only $1 million in actual gold. That's the reserve, and the meaning of the term "Reserve" in "Federal Reserve". At some point this was abused so badly, that laws/regulations were passed requiring a certain (albeit very small) amount available to back any lending.
This was immortalized in the famous "bank run" scene in the movie
It's a Wonderful Life, and that's what a bank run means, where people start to panic that the bank might not be able to get them their actual money, so people start withdrawing, and at some point that 10% reserve gets depleted and there's no more, and people get stuck unable to get their money. Today, there isn't actual "paper" involved, but it's just electronic ones and zeros on the banks' balance sheets. Used to be you'd have a fancy certificate (even with stocks), where you'd actually get "paper" saying (the bearer of this note is entitled to redeem this paper for so many share of stock or ounces of gold or whatever).
Now, the concern with silver is that reserves of actual physical silver have dwindled to nothing, largely because of industrial buyers, who obviously need physical silver and not just a "note" or "paper" or the "right to buy ..." silver. Worried that the reserves will not suffice, the various exchanges have jacked up the fees for actually swapping in your "paper" for physical silver, to deter that activity.
So there's a tension between people who want to actually hold silver and those who just buy paper ("right to own"), or even worse, those who buy "derivatives", mean options to buy notes and weird stuff like that, which don't exist, where all they do is buy and sell paper, with no intention of ever holding physical silver or caring about physical silver, or the right to buy silver (options/derivatives), where all they care about is buying-selling it for profit, so buy low, and then when the value goes up, sell it for a profit ... where they don't care at all about the silver. At some point, however, if the reserves of silver get so low that the exchanges can't meet demand for redemption, you'd get the equivalent of a run on silver, with people holding paper attempting to change it in before there aren't enough reserves to actually redeem their notes, at which point all those notes/paper would become worth absolutely nothing, as would the options, etc. Problem is that every ounce of actual physical silver is hugely leveraged.
Doing a quick search, right now it says that silver is leveraged 250:1 to 400:1 or possibly more. I would be on more, much more, and that they're trying to hide how badly leveraged it is. At some point of there's a 1000:1 or 10000:1, people will realize there's zero chance that the paper could ever be redeemed for the asset which backs it and due to a "run", the paper could go worthless. Problem is that many huge financial institutions, banks, brokerages, etc. ... hold TONS of this silver paper and these derivatives. That's what led to the 2008 banking crisis, where the derivatives were based on mortgage notes that were starting to go bad. Now, that was able to be solved, with much hardship because all you had to do was rewrite the mortgage notes, and you also had a physical house ultimately behind each one, even if the value had gone unstable (had dropped). But you could adjust the notes, and so those notes wouldn't become absolutely worthless. Silver's a different problem, since you can't just pull silver out of thin air or rewrite it like you could with a mortgage note. But the various banks and financial institutions that hold billions in silver ... those would be absolutely crushed if the paper price of silver collapsed due to a run. THEN other banks have holdings in those banks that go down, as it's all intertwined, and that's what they mean by a risk of systemic failure. Where if you have a couple mid-size ones go down, it would have a cascading domino effect, and some of them might even be "too big to fail", where just the one institution could collapse the entire system if it went down.
From an AI response:
The amount of silver derivatives (paper silver) vastly exceeds physical silver, with ratios estimated from 250:1 to 400:1 or more, meaning far more financial claims exist than actual metal, primarily traded through futures (COMEX), ETFs, and options, setting the spot price which rarely results in physical delivery, creating significant market leverage and potential volatility if many holders demand real metal.
Again, the problem with silver in particular is that electronics all require silver, and the industrial demand due to the explosion of electronics, AI, and everything else where every single appliance is "smart" and cars are half computer half motor vehicles, etc. etc. ... silver mining can't keep up. So the amount of silver left in the reserves of the main exchange(s) is just not going to "make it".
Topic: US Economy Going Down ... ? (Read 950 times)