Should the Bank of England prepare for aliens? A thought experiment in extreme risk

The Bank of England is duty bound to consider and prepare for exogenous shocks to the financial system. Whether that should include a disclosure that alien life exists – and is present on Earth – now appears open for debate.

There has been a flurry of articles in the media in recent days thanks to the discovery of an extraordinary report compiled in 2024 by Helen McCraw – a former senior analyst in financial stability at the Bank of England. 

I encourage the reader to peruse the report. Although it is not solely about financial risks, it draws the responsibilities of both the Government and central bank for managing financial stability to their logical extremes.

To explain, the Bank of England is legally bound to make plans to ensure UK and wider global financial stability in the face of unprecedented events. Therefore, McCraw argues, if there is a non-zero chance of a disclosure that intelligent alien life is on planet Earth, then theoretically there is a duty for the Bank of England to prepare for it. 

McCraw essentially argues that the Bank of England should prepare for the revelation of aliens because such a revelation would create what is termed an ‘ontological shock’. She describes such a shock as “the state of overwhelm induced in us when a wholly unexpected fact or event forces us to question our conception of reality.” 

This shock would be so destabilising to the entire globe as to have the potential to create a massive breakdown of the social fabric. It would throw the global financial system into unprecedented turmoil in the process. 

The Bank of England is prepared – and has experience in – stepping in as a lender of last resort when financial markets are in turmoil. From the financial crisis to the mini budget, the Bank of England has plenty of recent experience in providing this backstop. 

But the implications of the disclosure of alien life on Earth are by an order of magnitude more profound. Beyond the immediate banking crisis, it would have unfathomable implications for understanding who knew what and when. From Governments and defence contractors to private equity or lawyers – such extraordinary information could be extremely valuable while undisclosed. Who then has a right to it?

Indeed, the technological implications are similarly breathtaking. What McCraw deems unidentified anomalous phenomena (UAP – UFO no longer the term de rigueur) could have revolutionary effects on everything from material science to propulsion, energy production and storage, space travel and exploration. 

The bank would have to consider all manner of risks; widespread bank runs by panicked citizens; a catastrophic credit crunch; markets were swamped with investors trying to sell assets that suddenly had no value because of alien technological revelations; conversely, investors bidding on assets that became infinitely more valuable overnight (say a defence contractor with access to alien technology).

Such information discovery could create systemic legal, fiscal and monetary implications, destroy institutional trust and totally invert the concept of a safe haven asset. In other words, many of the assumptions that underpin our financial system could be thrown into immediate jeopardy.

We are now all too familiar with what investors (and the media) like to call ‘Black Swans’. The Great Financial Crisis, Covid-19, large scale terror attacks, nuclear disasters and other events have all taken place in the 21^st Century. 

Financial markets have reacted with varying degrees of fear or insouciance to these events. But a trend in many of these events is the fact that regulators and Governments had a bad habit of not being ‘ready’ for them. Although the overall impact has varied, all have required some form of scramble to contain. 

McCraw warns that governments appear to be in the process of deciding on how to handle and potentially release information on UAPs that may – or may not – prove what is going on ‘out there’. The implication of the report is central banks are sleeping on preparing for such a disclosure, despite its rising possibility. 

McCraw asserts that the Bank of England has a legal duty to prepare – which I think is ultimately not right. It is impossible to plan for every conceivable black swan event – all institutions can do is prepare for the broader sweep of what to do when markets lose their minds. 

However, the irony of the disclosure of intelligent alien life on Earth is that despite a tiny probability of occurrence – it is vivid in our societal imagination. To paraphrase the late Donald Rumsfeld’s famous adage, unlike some events which we can’t even conceive (‘unknown unknowns’), the revelation of alien life on earth is weirdly a ‘known unknown’, thanks to its associated cultural baggage. 

But this begs the question: even if it is a non-zero chance, is it a risk worth preparing for? 

This comes down fundamentally to what it means to take – and be exposed to – risk. If you eliminate all risk, then there would be no point in having financial markets. No risk, no reward. The Bank of England is duty-bound to prepare for calamities, but it is not in the business (and shouldn’t take it upon itself) to eliminate all risk. 

Indeed, the elimination of risk has been one of the most pernicious (and widely misunderstood) problems the financial system has perpetuated in the 21^st Century, thanks all to the sour taste left in the mouths of investors, savers, workers and voters in the wake of black swan events. 

The truth is that the financial system functions on an element of risk taking in order to grow and succeed. Aliens or otherwise, zealously de-risking the financial system creates its own kind of (slower burning) societal disorder – plenty of which is manifest today.   

Should the Bank of England consider what financial markets might do if revelatory information (alien-based or otherwise) is disclosed by a government such as the US? I would argue yes. 

The probability of a UAP disclosure event is extremely low but potentially devastating. But even spending some time on a ‘What If’ paper would be useful. We have game theory and wargaming for a reason. The unfathomable implications of such a change in humanity’s own view of itself mean we cannot know what we’d all do about it. But we can at least try to understand. 

Indeed, it is perfectly plausible clandestine authorities are in fact considering the same questions, wargaming and working on scenarios. Such scenarios could likely conclude the information is simply too dangerous to ever disclose. 

To do otherwise could possibly be fundamentally irresponsible, given the risks as we comprehend them. Who knows, perhaps the Bank of England has done the top-secret work. We’ll likely never know. 

Central banks cannot prepare for every imaginable shock. However, stress-testing how markets behave in extreme uncertainty is. It’s not really about aliens, it’s about how you manage an epistemological rupture. 

The danger ultimately is not that we miss what causes it, but that we have no idea how to preserve the financial system if it does happen, aliens or otherwise. 

Considering such extremes has value, both for institutions and individuals. If for nothing else, it might encourage us to be more thoughtful about our own risk tolerances and whether they are set at the right level – given everything we know (and don’t know) about the world today. 

The truth is, after all, out there.