TF Metals spells it out for those who have trouble getting it.
"I asked Ted about this when we did a podcast. His main thesis is that, by shorting, one creates two beneficial owners of the same shares. Guy A owns 100 SLV Bank A borrows GuyA's shares and sells them short to: Guy B who now also is long the same 100 shares that Guy A is long. So, now, what happens if both A and B move to redeem the shares? Must Bank A come up with the 100 ounces of silver at that time? If Bank A is only subject to supplying the metal if and when a redemption is requested, the effect is similar to the naked shorting of a Comex contract where the seller (bank) is never forced to deliver, either. You see, I think he has a point. Borrowing and shorting MSFT is not the same as borrowing and shorting an ETF which purports to have a 100% physical backing."