The Bazaar: Not a Quaint Market

Bazaar of Athens during the Ottoman Empire. Source Edward Dodwell, Views in Greece, 1821, via Wikimedia Commons.

The Eastern notion of the Bazaar was not just a marketplace, but also a nexus for craftsmen and merchants, where interest rates on credit, and currency trading values were set, much like a stock exchange.These rates and values could differ quite radically from one bazaar to another, which is why arbitrage often took place. However, distances between bazaars, and the hardship and danger involved with getting from one bazaar to another, could make arbitrage very complex.

 Bazaars were, in other words, wholesale hubs for commerce and they provided key arteries for the flow of capital across trading routes around the globe. This is important because it would indicate that West or East Asian capital had vast linkages that were not defined by European colonial capital alone. These bazaars were also not 'informal' although colonial authorities were often keen to describe them as such. In India for example, the most important mercantile communities would report their monthly bazaar rates to monetary authorities of British India. These bazaar rates would have a significant influence on official bank rates. If you are interested in a more detailed academic account of this see Rajat Kanta Ray's influential article: 'Asian Capital in the Age of European Domination: The Rise of the Bazaar, 1800-1914.'

What determined Interest Rates on Bills of Exchange?

An English Bill of Exchange dated 1810.

Image courtesy of the British Museum Trustees.

 Interest rates on bills of exchange could fluctuate considerably. These rates depended on several factors: the prevailing market rate, the particular usage of the bill, the riskiness of the transaction, or the familiarity and strength of the connections involved in the exchange. Main commercial hubs which connected long-distance trading, often featured more favourable rates. Merchants frequently borrowed money through bills where interest rates were low, and sold where rates were high. In this way, complex systems of arbitrage evolved.