If what happened at that point in time would have been accompanied by a liquidity squeeze, a market event like 2008, it would have been game over. If you would have seen credit restricted in the futures market, against good delivery failures, in the cash market, it would have been game over. Rick, there’s something I’ve been wanting to ask you for a while because this actually goes back to the past few years. I found particularly interesting. You were running or involved with the PSLV trust back then, and I heard a couple of interviews where you mentioned that initially it was more just the retail product that got caught offside on that one weekend, yet later as more money kept coming into PSLV to fill the demands because you can’t have, well, the metals coming, or it’s over here, we’re going to get it, and you talked about how you cleared out a couple of different cities of their silver supply, and perhaps we can start there, and then I might have a couple of questions to tack on.

That was an interesting experience. I had anticipated that the silver market was broad enough that it could accommodate our demand in almost any size, and while the silver market is very, very, very broad, the silver market was then, and I would suggest is today, much more liquid, or much less liquid than you believe. Well, there’s a lot of supply in places like private ownership by the Indian peasantry. That isn’t good delivery silver, and in the case of brought physical trust, we could only buy silver that was in the LBME or in the COMEX good delivery form, and we were having days when there was $50 million of inflow into our physical silver trust.

No problem, says Rick. We clean out Toronto. Okay, we go to Montreal. Clean out Montreal. Hmm, interesting. Well, no problem. We go to Chicago. We clean out Chicago. Hmm, this is becoming concerning. The market’s front running us. We go to New York. We clean out New York. It turned out that London was ultimately able to accommodate us, but London wasn’t able to accommodate us overnight, which is what we were used to. We were used to buying silver and having the silver go from somebody else’s pile in a vault through a screen to our pile in a vault.

What happened was that we cleaned out all the piles. Until we ran into the final piles in London and Zurich, which accommodated us. I actually think that the young adherents to the silver squeeze were onto something. I think their problem was that they bought a long-term narrative and they took in short-term tactics. I actually believe that there are imbalances in the silver market. In particular, between the physical market and the paper market. That’s what we ran into. There’s tons of silver that trades every day in the physical markets. Some days, a hundred times more silver transacts in the paper market than exists for good delivery in the physical market.

It was our bad fault. It was our bad fortune to run into that, literally. Chris said, we got through it, but it contributed to my baldness. You still look good. You got plenty up there. I think that the people who were interested in the arithmetic around the silver squeeze didn’t understand that they needed to be persistent and tenacious. In other words, that the unraveling of the dichotomy between the physical market and the paper market could take five years to unwrap. Many of the youngsters who were involved in the silver squeeze had a much more limited time frame.

They wanted it to happen in five weeks or six weeks. I suspect that many of them employed much too much margin. If you’re paying margin interest for five years, if the event that you’re hoping to participate in takes five years and you’re paying 8% a year, you might not be early. You might be wrong if you’re an interest payer. I think that’s what some of the youngsters in the silver squeeze ran into. Yeah, and interesting. You mentioned not in five weeks, but five years. We’re almost four years in, so maybe next year, I believe the year.

Although, Rick, I remember shortly. Well, remember that a lot of the retail participation in the silver squeeze abdicated. They haven’t held the silver for five years. When silver didn’t meet their expectation, they liquidated in favor of meme stocks, in favor of Bitcoin, in favor of some other speculative asset. So five years would have involved them continuing to, in their parlance, stack. That didn’t happen. They decided to take on the banks, and the banks kicked their ass. Let’s get this straight. It doesn’t change the equation. What the silver apes hope to cause to occur will be done by the market in the market’s own time.

It will take place, likely without the apes. So you still do see that as an event that can we say is a matter of when rather than if a statement is used. I mean, the disconnect between the futures market and the fiscal market is as broad as it ever was. And the disconnect that we have spot faced, which is to say the temporary increase in demand relative to the system’s ability to effectuate good delivery supply is there. And we weren’t big buyers. You’ll recall that at that point in time, over the course of a year, year and a half, we probably accounted for a billion and a half or $2 billion in demand.

We were the players, because we were the only instrument that took silver out of circulation. The ETFs ebbed and flowed on a daily basis. When the market replaces Sprott, which will happen, that really truly changes the equation. Yeah, I could certainly imagine that because shortly before that happened, let’s say between Silver Squeeze and that summer, there was a report from the LBM. I think it was in April of that year. They mentioned had the demand continued at that pace that they were weeks away from running out, which I certainly took notice of that statement.

So based on what you’re saying, are you able to venture any sort of feel for how close do you think back in 2021, when this was happening, you said eventually in London, they were able to fill what you needed. Are you able to get any idea of how close we actually might have come to a great point back then? Not a clue. If what happened at that point in time would have been accompanied by a liquidity squeeze, a market event like 2008, it would have been game over. If you would have seen credit restricted in the futures market against good delivery failures in the cash market, it would have been game over.

Now, understand that you wouldn’t have had a short squeeze like you have in a fair market. The LBM may would have declared something called force majeure and they wouldn’t have demanded settlement in silver. They would have cash settled and they, the exchange would have determined the cash settlement price just like they did in the tin market. So part of the premise around the Silver Squeeze, which suggests that we had a fair market in silver, that the exchange isn’t controlled by the dealers in the exchange is false. That notwithstanding, people would have made a lot of money.

Understand too that the failure to deliver didn’t reflect overall physical inventories in the silver market. It involved good delivery silver, the silver that is the stuff of the paper futures and the inventory that is required for responsible investment vehicles like Sprott physical silver. Over time, if institutional demand and retail demand for silver continues, what you will see is a dishoarding of informal silver. Silver held by living, breathing human beings in the Middle East and in South Asia and the reintroduction of that silver into the formal system, provided it doesn’t happen all at once, provided it happens over time.

And I think this process probably accelerates. You’re seeing a conversion of informal silver to formal silver in China as an example. I think really the possibility for a cataclysmic break really has to do with how rapidly the market would be challenged. We were a catalyst that challenged that market, Chris. And to be honest with you, a fairly false small catalyst. The fact that a billion and a half or two billion dollars in net buying had that dramatic an impact on the physical good delivery silver market let me know just how leveraged the futures market was.

Yep. And you mentioned in there that at some point you could foresee silver coming from private holders and then going into industrial uses. We’ve actually had reports from a couple of billion dealers this year that is already beginning. I’m guessing you might be aware that there’s been a lot of retail selling in silver over this past year, year and a half. So seeing that to some degree. And I guess the question that this all leads to is that given what you just described, what was happening then. And in the past couple of years, we’ve had the Silver Institute report deficits for three to five years depending if you count the ETFs or not reporting another large deficit on track for this year.

So I’ve wondered if we were that close and maybe it, and you touched on how sometimes there’s a matter of you don’t have silver in a certain form versus silver exists somewhere that could be refined into that form. So I guess just if you could put it all together with what you described and that we see deficits reported, if you have any comment and whether you have a different feel for whether there is a deficit or not. There is certainly a deficit. Understand that the fabricators, the people who are making silver panels don’t need LBMA good delivery silver.

They could care less. They are not fiduciaries storing it on behalf of third-party investors. They are people who are using metal for its own. To my knowledge, there is no major fabricator that is experiencing delivery failures. The supplies of industrial grade silver and silver alloys relative to the industrial demand is very much intact. That’s still a very robust market. I think that you’re seeing leakage from retail holders because retail holders are bored. They don’t need it to make mirrors. I suspect until you have seen sufficient momentum established by the gold market that generalist money comes in the silver space, that that circumstance continues.

It will continue until it doesn’t. I realize that that doesn’t make a very good internet headline for a video, but that doesn’t matter much. Your viewers need to understand that precious metals markets are very much intact, that traditionally a precious metals bull market has the momentum established by the fear buyer, the gold buyer, and at some point in time when the narrative established itself, either because of news flow or some other reason, that silver replaces gold as market leaders. I don’t know where we are in the market. Nobody else does either, although some people pretend to know.

I just know that this is a question where the answer begins with when, not if. And if that answer isn’t sufficient, people should do something else with their money. I think that’s fair enough. I guess the other thing that I wanted to touch on is that we have a deficit. We’ve seen the known inventories come down over the past three years. As you pointed out, I wouldn’t say we’re in code red territory where they’re scrambling for the last bar by any means, but obviously you’re very involved in the equity side. And we’ve talked to miners, talked to analysts, fund managers, and there’s not a lot of money going in there.

Even that a couple of spurts this year, from my perspective, where a couple of times you had gold or silver up, you know, a good percentage on a few days in a row and money came in, but we’re not having capital go in to address this deficit. It’s almost like you have a deficit and rather than working things over time, getting permits done quickly, we’re seeing the opposite of that. Is it possible we get to the point where there is some sort of shortage on the industrial side or how do you see that all? I think the deficit is bigger than we think it is, because I think the informal supply was bigger than we thought it was.

I mean, I remember all the way back to the middle part of the decade of the 80s, when Buffett suddenly reported to the world that he owned 15% of the world’s above ground supplies of silver, that is to say reported supplies. And the silver price just shot. That’s before you were in the racket, I think. The silver price just shot up and then it collapsed. And of course, all the silver bugs said manipulation, manipulation. That’s wrong. What happened is that the Indian rupiah fell by 50% in US dollar terms and the price of silver went up by 200% in US dollar terms.

So from the point of view of the Indian peasantry, the price of their silver went up by 400%. And that occurred in conjunction with a bad harvest in India, where the Indian peasants had a choice between keeping their silver and feeding their kids. Well, that was pretty straightforward. And a whole bunch of silver came out of inventory from a place that we didn’t know it had been in inventory. The understanding that I have, and it’s a very informal understanding, but the understanding that I have with the Gujarati precious metals trading community, an informal community, I call them traders, their government calls them smugglers, is that there has been substantial physical dishording of silver that has accompanied the reduction in the exchange rate between the Indian rupiah and the US dollar.

And I think that the offtake of physical silver from informal hoarders in emerging markets in favor of industrial applications has been greater than we believe it is. We can observe it in official sectors. We can observe dishording from industrial refiners like Engelhardt. What we don’t see is the informal dishording that’s taken place. And I suspect that the informal dishording has been much greater than we believe. And I think that the consequence of that will be that if I’m right about the direction of precious metals prices, that the adjustment, if that’s the right word, between the paper market and the physical market could be, maybe not will be, but could be much more dramatic than we believe.

Okay, that makes a lot of sense. And perhaps the last one for you here today, you touched on this a little bit before when you were mentioning, we were talking about the amount of silver that’s been sold back, but looking at it a different way, I’d say in the past five years, we’ve seen a shift in gold, where if you told people five years ago, hey, central banks are going to be buying in the amounts they are, and we’re going to see governments and central banks start to look at things differently.

So we’ve seen a shift in gold. We’ve I don’t know that I would say we’ve seen that in silver, certainly within the precious metals community, there have been new people who have come in yet. If my mom didn’t know me, she wouldn’t be close to picking up the phone to buy silver yet. Do you still expect that that will see? Yeah, you make the most important of all points, which is to say that the strength in gold is not retail strength. The retail has not been buying it. The central banks have been buying it.

If you measure popular sentiment around gold with cash inflows to the ETFs, you only saw five months of positive flow into ETFs. Right now, you’re selling retail selling of gold and retail selling of silver. Why did gold respond in silver? Well, that’s simple. Central banks buy gold. With the exception of stated intentions by the Russians, central banks don’t buy silver. So a market that moves as a consequence of the participation of one buyer probably doesn’t move in a sector where that buyer isn’t focused. I believe that the motivations for central bank buying, one being the weaponization of the U.S.

dollar and the extra territorial imposition of U.S. will, has been partially responsible for central bank buying of gold. I also believe that the calculus around the U.S. dollar, which we talked about earlier, a currency where they pay you 4.2 percent, where the real purchasing power of the currency is declining by 7.5 percent, has also led to the selling of U.S. Treasuries and the buying of gold by foreign countries. And when that simple calculus becomes apparent to retail on a global basis, then I think you see a real precious metals bull market.

When you see continued central bank buying, continued official sector buying, and you see net inflows to the gold ETFs, then the market gets legs. [tr:trw].

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