Fiat Copper Money and Trust: Monetary Campaign of Alexei Mikhailovich (1654–1663)

Prior to the introduction of paper money, monarchies devised innovative strategies to meet their financial needs. The issuance of copper currency at enforced exchange rates as the monetary campaign of Tsar Alexei Mikhailovich of Russia (1654–1663) deserves further investigation. The prevailing literature often highlights the fiasco accompanied with agio and hyperinflation. A better understanding of these initiatives can be achieved through a framework of trust, as expounded by Aglietta and Orléan. Trust, in this context, operates in three levels: as societal norms and conventions, as public trust in governing authorities, and as an interplay among sovereigns. This framework reveals that inflation correlates with a decline in trust, challenging the efficacy of both the State Theory of Money and monetarism. The various facets of trust shed light on the successful aspects of these monetary operations in mobilizing resources. However, short-term successes, leading to misguided expectations can be seen as a “trust trap.“ Notably, the monarchy's failure to recognize the new currency constituted a mistrust. The ease of achieving objectives incentivized reliance on credit, rendering the system more fragile. The lessons learned from this endeavour, attributed to Afanasy Ordin-Nashchokin, helped the subsequent monetary reforms of Peter the Great.