A couple of articles dating back to 2006 by Ted Butler and his friend Israel Friedman, well worth reviewing now that Silver is approaching it's ATH, and poised to cut through $50 like a hot knife through a stick of butter (RIP Silver Users Association, the linchpin that Shorty cannot survive without.)

Many predictions they made 5 years ago have come to pass, and if their track record holds up, then these thoughts will continue to serve well as a guide to how this roaring bull market will impact miners and investors on a number of fronts going forward.

If you were to take one point away today, read the last paragraph I clipped and think about the investment return potential for Silver equities when those short $250 Billion worth of Silver derivatives compete amongst themselves during the final End Game.......for a piece of the real deal before the inevitable D-Day (Default Day) bankrupts 90% of the nay sayers *or* completely discredits the underlying Silver derivatives markets when Shortys default and regulatory authorities bail them out with mandatory cash-equivalent settlements to "metal" owners on the other side of the deal. I believe this is exactly what is unfolding today - a final mad scramble - there is no other credible explanation to account for how far and fast Silver has come in recent months.

ESL

Physical Silver Yes, Speculation No

http://news.silverseek.com/TedButler/1153245360.php

"Let’s see the stages of a shortage. One, pre-shortage – the users will have to wait 3 to 6 weeks extra for shipments. Then the prices can rise to $20-30/oz. Two, shortage – the users will wait an extra 6 weeks to 4 months for silver. Then the prices can rise above the old all-time highs of $50/oz. Three, super shortage – the users have to wait more than 4 months for their silver shipments. The price will range from $100 to prices you won’t believe. If this last scenario occurs, and gold has plenty of supply, the price of silver, at a minimum, will equal the price of gold. And my crystal ball tells me that silver can exceed the price of gold by a great deal.

You should be asking, how did I calculate the prices for the different stages? My calculation is very conservative. I only take into consideration the future deficits between the producers and users, which is running currently at around 50 million ounces annually. I also take into consideration that private investors have 400 million ounces in bullion and coins that they will sell in some stages. In stage one, pre-shortage, I think investors will be willing to sell 50 million ounces at a price between $20 to $30. Stage two, shortage, investors will sell 200 million ounces between $30 and $100. And the remaining 150 million ounces will be sold in stage three, super shortage and the prices will be truly shocking."

What Happens At $100 Silver

http://news.silverseek.com/TedButler/1165255836.php

"Undoubtedly, the only way we could have $100 silver would be under shortage conditions. Silver could never get there with ample supplies and no delivery delays. For silver to be at $100, industrial silver users would have to be fighting for available supplies. Think of the recent bizarre display of human behavior in the scramble for Sony’s Play Station 3, a personal entertainment device. Then imagine the scramble for a substance vital to maintaining industrial assembly lines and employment. The silver shortage scramble will be a 24-hour a day world-wide panic by companies, large and small, all fighting for corporate survival and to establish inventories. It will be the attempt to build inventories that will dramatically increase demand in spite of higher prices.

Short sellers, including the concentrated short sellers, will, in essence, no longer exist at $100 silver. They will have either covered, bought back their short sales, delivered to close out the short sale or defaulted. The 200 million-ounce concentrated short futures position on the COMEX and CBOT will be underwater by more than $17 billion if it were held to $100. However, it will be closed out, one way or the other, long before we get to $100 silver. And this is just one small component of the total silver short position. If you take into consideration the entire short silver position, including listed and OTC futures, forwards and options, leasing obligations and bank silver certificates issued without physical silver backing, the total silver short position could be well over 3 billion ounces. At $100 silver, left uncovered, the loss to the shorts would be over $250 billion"