It’s time to kill the penny.

You used to hear people say “I remember when a loaf of bread was a nickle”. Today it’s 40x that. Once you hit an inflation point this high it’s time to make a change.

Lots of people are advocating for the demise of the penny, but I’m going much further in re-engineering the cash system. Its time for an overhaul starting with the dropping of a decimal point.

In my scenario, in addition the penny, the nickle has to go. You can’t properly go to a single digit decimal unless you get rid of all two digit denominations.

The dime becomes the new lowest value denomination. It works out well as it is the smallest US coin already.

Some people may get hung up about how much more things will cost with the loss of a decimal place. Prices ending in .01 to .04 will round down, and .06 to .09 will round up. The one valid complaint is that .05 will also round up, resulting in an average of a .01 price increase. This can be solved by an odd/even rule, where .05 rounds up but .15 rounds down, which makes it completely price neutral but is a pain to impose on a semi-literate math society. I’m not concerned either way, the loss of the last 9 in a the marketing sweet spot of “$19.99” price will more than offset the .05 issue.

I know many can’t stomach the loss of the penny, but here’s an even bigger kicker – the quarter needs to go. It is a two decimal digit denomination, or 2.5x a dime. It has no place in the modern world. It would possibly survive if it was a 20-cent piece, analogous to the 20 dollar bill, but its not and it must die. They seem useful, but that’s an illusion of their multiple factor (4x nickle, 2.5x dime, and x4 for a dollar). What can you really buy for a quarter? Even a video game is now 50 cents to two dollars.

In its place there needs to be a new 50-cent piece. It should be larger than the dime, but smaller than a quarter. It would be nice if it were a different color (gold or copper) but I don’t care too much about the aesthetic details, so long as the next denominations up are in multiples of the prior denomination, either 2x, 4x or 5x.

Next, it is time to force the issue with respect to coin dollars. The one dollar bill should be entirely replaced with the coins. I’ve read the arguments against this and I think (almost) all are BS. It isn’t that hard, the retooling is minimal, and times are changing. People will buy a new wallet and get used to it.

In addition, it is time for the five dollar bill to go as well, being replaced by coinage. The time to do it is when you bite the bullet and get rid of paper single dollars, don’t go through the fight twice.

Finally, the 10 dollar bill should be retired. Five one-dollar coins equaling a five-dollar coin is an appropriate multiple, and four five-dollar coins is appropriate for the next denomination, the 20 dollar bill. A 10 dollar coin will need to be introduced some day as the lowest denomination, but this isn’t needed for quite some time. In the mean time, having a 10 dollar bill that is only 2x the next bill down and only 2x compared to the next bill up has created a interchangeability problem. Have you ever noticed you don’t have a 5 when you need one much more than any other denomination? Kill the 10 and this problem goes away.

Much of this will become moot as we move towards a cashless society, but at least for the next two decades cash will be part of the culture, and it needs to be managed and changed as warranted.