For centuries in Egypt there had been no true currency with which to buy and sell goods. Most markets operated on a barter-and-exchange system. For very large-scale transactions it was possible to pay in gold or other precious metals, but the idea of coinage was still relatively new. True monetary economies had emerged in the city-states of the Mediterranean beginning around 650 [B.C.E.], probably first in Lydia, whose later King Croesus had made himself a byword for fabulous wealth. Ptolemy I had made some attempts to follow suit, issuing coins called staters just as Alexander had, but outside Alexandria these were as much demonstrations of royal power as they were useful coins. His son, however, now massively extended this scheme with the creation of a state-run banking system with local branches throughout the towns and villages of the country, all reporting back to the central bank in Alexandria. From these banks a coin-based currency was introduced, backed up by a system of written “bills of exchange”—promissory letters which could be exchanged for real money, or, as we would call them, banknotes. The entire rural economy was to be centered on these local branches, which provided the capital—seed grain and tools—that the farmers needed. They also provided massive state-aided infrastructural schemes such as the creation of a reservoir in the Southern Fayyum oasis which held 360 million cubic yards of water and irrigated 60 square miles of arable land. This was not pure largesse, however. Nearly all the grain produced by farmers was taken into the royal treasury in the form of tax. More land under cultivation meant more grain, and more grain meant more money in the Alexandrian coffers.
The driving force behind this economy was, of course, the immense quantity of grain produced in the Nile Valley. The annual flooding of the Nile, which ran through an almost rainless desert, made this the most productive agricultural land in the known world, where the sun always shone on the crops, but never dried their roots. Such valuable land was largely owned by the crown or the temples and leased to farmers, who were free men and women who often used slave labor to maintain their estates. Such estates produced a vast surplus, much of which the state took. Yet Ptolemy’s system also allowed for a degree of individual enterprise, as banks could handle private financial transactions, provide loans, and broker deals.
Whatever capital was left could be spent in the thriving open markets. Traditionally Egyptians had acquired the necessities of life they couldn’t produce for themselves by direct barter—effectively swapping a loaf for a pint of milk. The Greek immigrants, however, greatly encouraged the development of markets throughout the whole country. These were often held in the precincts of temples, and records exist of the temple taxes levied on the traders. In the town of Oxyrhynchus, for example, had you taken a stroll into the courtyard of the temple of Serapis on market day, a chaotic vista would have opened up as you passed through the first pylon. That day the peace of the temple would have been shattered by the cries of stallholders, all hoping to relieve you of some of the coins in your pocket. Here the local farmers and traders sold local vegetables, wood, olives, rushes, bread, fruit, wool yarn, and plaited garlands from wooden stands, each of which had been licensed (for a fee) by the temple. Among the crowd you might pick out the priests of Serapis, moving between the stalls, checking their goods and imposing the appropriate import duty on everything from olives, dates, cucumbers, squashes, beans, spices, and rock salt to pottery, green fodder, wood, and dung. The throng would also have attracted other traders offering more sophisticated wares, from the bulk grain dealers looking to turn a profit back in Alexandria, to the tailors, leather embroiderers, tinsmiths, butchers, and brothel keepers who always gravitated toward a crowd.
— The Rise and Fall of Alexandria, pp. 77-78