I do foresee a silver market corner occurring which coincides with several apparently unrelated but actual market corner causes. It could be difficult to determine if a market corner is a planned market corner or an accidental market corner until it is over.

A silver market corner or any other market corner will occur from outside the U.S. to avoid U.S. government entanglements and intimidation. The experiences of the Hunt brothers in 1980 serve as a reminder to those in the U.S. who might attempt a market corner.

The silver market corner, when it occurs, will be on the basis of physical silver shortage and lawsuits by non U.S. banks/financial entities demanding physical silver delivery. These entities will make it publicly known worldwide that they are being and/or have been injured with demands in U.S. courts for punitive damages in addition to the physical silver. A few tort/contract lawyers will benefit financially in the tens of millions of dollars.

I do not see the silver market corner directly involving the U.S. Comex silver exchange. The Comex exchange has been manipulating silver prices for years and has rules in place to the detriment of most people seeking physical silver. One such rule, is the limiting to three million ounces per month of deliveries if it so chooses. Another practice favors the selling of naked futures by four to six very large traders. In my opinion, the Comex is an old boys club where favors are given and rules are changed for the benefit of a few in the Comex trading.

INTRODUCTION

I have been asked several times for an update on my thoughts of a silver market corner happening as a. result from my March 2002 editorial "Is A Silver Market Corner Underway?"

This editorial is not intended to simply repeat the material in that essay or other essays referenced.

For more information on the silver, I recommend the reader read the many recent excellent editorials and useful information in index form from which the reader can click to read them. These editorials by titles can be found at

A listing by analysts/author's name of contributors can be found at

There is also a search function for specific topics on the www.gold-eagle.com web site.

The term $5 billion used throughout this editorial is my estimated amount of money needed to corner the silver market. It is based on buying up @$5/oz. all mined silver (550 million oz) and reclaimed silver (250 million oz) within a one year period, plus the alleged global silver stocks (200 million oz) to cause a major physical silver market disruption. Current world silver prices are near $4.50/oz.

The silver market corner will be characterized by most stakeholders experiencing emotional expectations which contain extreme "fear" or "greed" factors. The remainder of this editorial focuses on some of these factors with an attempt to quantify them in terms of U.S. dollars.

FEAR FACTORS

Japanese individual savers fearing impending bank closures/failures may buy hard assets since they do not have access to the Foreign Exchange market. They are currently buying gold with delivery, but could soon be buying silver for delivery. Japanese savers are said to have the equivalent of 10,000 billion equivalent U.S. dollars. However, Japanese savers could experience major banking failures (recently the fifth largest bank nearly failed) at any time. $5 billion is only 0.05% of the savings if used for purchasing physical silver as a useful non perishable portable hard asset.

Chinese individual savers are now able to purchase silver through a Chinese mainland silver exchange. The silver trading volume is currently small. I think few Chinese citizens know that they can buy physical silver. I realize that Chinese have low incomes. The Chinese population is over 1 billion people. If the Chinese bought an average of only ounce of physical silver/citizen ($5/citizen) in one year, this would represent $5 billion.

Chinese & Hong Kong Central Banks with devaluation fears have over 385 billion U.S. dollars as banking reserves. Diversion of 1.3% of these banking reserves for purchasing silver as part of the reserves would be $5 billion. The Chinese government for political leverage or other agendas could disrupt some U.S. foreign policies or U.S. economy by such a tactic.

Asian Central bankers with devaluation fears of excess U.S. dollar reserves such as Thailand, Singapore, Malaysia, Taiwan , India and Indonesia have about 418 billion U.S. dollars as reserves. Diversion of 1.2% of these assets into physical silver reserves would be $5 billion These banks are said to be meeting about excess U.S. dollar reserves.

Japan Central Bank with devaluation fears of its 460 billion U.S. dollars in reserves could convert about 1% of the dollar reserves ($5 billion) into physical silver as a prop for Japanese banking failure concerns. I do not think the Japan central bank is considering such a move at this time.

U.S. militia/survivalists: A small part of U.S. population (militia types, survivalists, and people still remembering or having heard of the 1930's depression may start putting assets into gold and silver. If one million citizens of the 280 million population was to buy 1000 ounces ($5,000) of physical silver within a one year period from terrorist concerns affecting banking, then that would represent $5 billion. Silver as coinage for trade (much easier than gold) could be used in event of banking rules such as recently happened in the Argentina economic meltdown. This is one way to pass on inheritance wealth (quietly) without taxation should inheritance (death) taxes be made law again. The U.S. inheritance tax (death tax) has been repealed, but could easily and is likely to be reinstated due to U.S. government budget deficit concerns.

A "Carry Tax" for citizen savers has been proposed and is being discussed by people within the U.S. government and in the Japanese government." This tax is upon savings if held too long a period. The idea is to get savers to spend their fiat and thereby stimulate economic activity. The question becomes, "what is savings?" Does this include bank savings accounts, certificates of deposits, Christmas clubs, IRA accounts or just currency?

Already the U.S. government is printing currency with different designs and at some point will declare a fiat design of a period past to be worthless. The government will claim this practice eliminates criminal gained money, laundered money, and even terrorist related money. There is even discussion of marking fiat with a date, so that if held too long, the government will accept it only at a discount to the face value.

If a certificate of deposit is paying 2.8 percent and the carry tax is 3 percent, this is a no brainer negative return on savings even if inflation is zero percent. Who is going to have an incentive to open a savings account? Will banks offer higher interest rates to entice people to put money in the bank without the Fed raising their interest rates? This could produce an incentive for physical silver or other non perishable portable assets as a savings tool. The current U.S. savings rate is about 2%/year of the 10,000 billion Gros Domestic Product which is $200 billion. Savers might choose (a no brainer) to divert 2.5% of this into physical silver which is $5 billion. than to receive a negative return on savings investments.

Saudi Arabia princes of which several are billionaires fearing overthrow may convert fiat assets into physical gold and silver. These princes if forced into exile are likely to find that Saudi Arabia bank notes (especially electronic bank equivalencies) will not be available, accepted or useful in exile. A similar experience is ongoing but never mentioned in the U.S. media about Iraq bank notes.

I think that a combined purchase of $5 billion of physical silver would not strain the combined budgets of a few princes. Such a purchase might be used as a political/economic leverage weapon in dealing with those of non Islamic beliefs or those of Islamic beliefs they do not agree with. There is now near civil war in Saudia Arabia with terrorism by various radical Islam groups. The Saudi banking system and the government is reported to be in trouble as a result of "exuberant irrational" spending in past years which is now out of control.

Manufacturers who use silver as a raw material for their product quickly fear disruption or shortages of physical silver since it shuts down manufacturing. Therefore, manufacturers sensing a disruption or shortage, will move from "Just In Time" procurement of silver to "silver stockpiling." Manufacturers world wide might double their purchases for a one year of silver stockpiles to keep their manufacturing facilities working during any interruptions of physical silver. This translates into $5 billion worth of silver.

Fear of U.S. dollar devaluation by foreign holders of U.S. assets could cause significant repatriation of the investments. Foreign Investments in the U.S. exceed $2,000 billion. One means of extracting asset value and repatriating the asset value is to purchase portable non perishable assets such as silver. A conversion of 0.25% into silver is $5 billion.

Changes in U.S. Brokerage portfolio recommendations include a growing but still small U.S. brokerage firm mantra that recommend all portfolios contain 1% to 5% in precious metal investments (usually of the paper form as mining stocks) If the U.S. stock market capitalization is about 9,000 billion dollars and if 0.055% of this capitalization is diverted into physical silver, then this represents $5 billion. Current silver mining stock capitalization is about three billion dollars.

SILVER COINAGE FACTORS

Nevada has introduced legislation to bring back a silver coin for currency/memorabilia usage in Nevada. I don't see this as being allowed to happen by the federal government. However, if 100 million visitors/year each bought only one ounce of silver ($0.5 billion), this would still be far short of causing a silver market corner, but would effect the silver market prices. It is unlikely such a program would be successful in causing a 100 million visitors to buy $50/visitor which is $5 billion.

Mexican Libertad coinage is a proposed coin for currency in Mexico. There is a well written editorial that can be found at www.gold-eagle.com/editorials_03/salinas061103.html "Mexican 'Libertad' coin" by Hugo Price

This editorial is interesting in saying that Mexico has about 50 billion U.S. dollars doing nothing but acting as a reserve for Mexican banks. The idea is that a portion of it, say ($5 billion) of it might be used for making these silver coins and instilling (unplanned) confidence in the Mexican economy, increasing bank profits, and providing a means for alleviating Mexican citizen fears and expectations of continuing Mexican peso devaluations. Please note that this proposal provides an average of about 10 Libertarian ($50/citizen) coins for each of the 100 million Mexican citizens.

Argentina silver coinage is talked about as one means of trying stop or stabilize the Argentina chaos and economic collapse as a result of $100+ billion default on banks loans to foreign banks. This economic chaos, civil unrest, and hyper inflation is not being reported in U.S. media. In my opinion, it is doubtful that an Argentina silver coin will be used in the near future. History indicates a dictator will arise from hyperinflation. Such an Argentina dictator might use $5 billion for physical silver that would entrench him with further powers that otherwise would have been used to pay on defaulted debt. A side note is that Argentina is said to mean "Little Silver." Only a 50% probability of this happening is given by Jim Willie CB.

Islamic based coinage and banking is being considered in business transactions by various countries. Islamic religion deems currency as the Dinar gold coin (4.25 grams) and the Dirham silver coin (3.00 grams) with a relationship where 7 Dinars trade for 10 Dirhams. This ratio is interesting in that 1 ounce of gold is nearly equal to 1 ounce of silver for a Gold/Silver ratio of 1. In the current 2003 market place the ratio of gold to silver is $360/$4.50 = 80. Is it possible in an Islamic country to exchange 1000 ounce worth of Dirhams for 1000 ounce of Dinars and return with the gold Dinars for meltdown in the U.S.?

Islamic banking requires 100% reserves of bank notes and no interest can be paid on loans. Whether Islamic based countries "walk the talk" in their beliefs remains problematic. However, I think an Islamic bank should have no trouble putting together $5 billion from oil sales to purchase silver for minting Dirhams. However, if trading is then kept to only between true Islamic believers, it might work for a while.

Currently, world wide oil is priced in U.S. dollars. However, Venezuela fearing U.S. dollar deflation plans to price its oil in Euro's. Rumors abound that Saudi Arabia plans to soon price its oil in Euro's as well. There is an remote possibility that Islamic oil could be priced in gold and silver according to Islamic law instead of U.S. dollars, Euro's or Yen. A change in oil from being priced in U.S. dollars will have devastating effects on U.S. banking/financial institutions and accelerate U.S. dollar devaluations. In my opinion, A U.S. dollar devaluation of 20% or more within a year is a realistic projection.

GREED FACTORS

Foreign take over of a U.S. Large commercial bank such as Citibank or JPM Morgan is a possibility. These two banks are said to be involved in derivatives. with notation values on the order of $47,000 billion. Most have to do with interest rate and currency hedges. One means of a foreign entity taking over one of these banks is to enter into derivative contracts including performance insurance for physical silver delivery worth $5 billion at a particular date(s). In event of a contract failure to deliver, there would be rights by the foreign entity to claim punitive damage far larger than the physical silver value. The foreign entity would insist on physical deliver to a destination outside of the U.S. knowing the bank is unable to meet its agreement terms. Part of the punitive damage awards could be parts of the U.S. bank being sold to foreign entity.

Bank physical silver leasing is alleged by Ted Butler to have approached one billion ounces ($5 billion.) I have to yet to see publicly reported the names of any bank or amounts of any physical silver so leased. I have no confirming source that this has actually taken place. There is obviously a market for physical silver leasing since Kitco produces charts of physical silver leasing rates. When banks are experiencing profit losses from other bank operations, they may choose to demand physical silver at the end of silver leases knowing full well that it cannot be delivered. Thus, they may achieve a pure profit by contract revision whereby the silver lessee pays the current silver (paper) market price plus a hefty penalty.

Foreign Billionaire Investors might precipitate or lead a silver market corner U.S. Billionaires such as Warren Buffet and Bill Gates are unlikely to knowingly cause a silver market corner. This is because they have large U.S. financial holdings which are at risk of loss/interference by U.S. government politicians and regulators. However, Warren Buffet by his purchase of 130 million oz of silver and Bill Gates 10% holdings in Pan American Silver are positioned to take advantage of a silver market corner.

George Soros of British origin is a possibility as are many Islamic oil billionaires. George Soros is very secretive in his dealing but has taken a position through formation of a company acquiring rights to silver mining properties.

Government export taxes on newly mined silver.

Physical silver exporting countries in order to increase employment or revenue might apply export taxes on raw silver or require silver be exported tax free only if it has been fabricated into something such as film, jewelry, electrical, mirrors, or biocides. This might be a cover for attempts to increase political leverage in dealings with the U.S. or another country. This could cause disruption of silver movements in the world but probably not a market corner. It is doubtful at the moment that one or more of these countries will implement such laws. Six countries with mined silver output which could implement such laws are:

FINAL NOTE: Remember to always "expect the unexpected" in the silver market!

May the reader experience financial prosperity, good health, spiritual growth, and freedom in the coming days and years!

Wally Bently

2003 July 1st

All flames and comments are appreciated. I reply to most e-mail. Reply to wallybently2@aol.com

DISCLAIMER: This is not a recommendation to buy or sell anything! Do your own due diligence!