In 1947, our smallest coin was the penny. The CPI has increased by a factor of 14.1 since 1947. That is, a penny in 1947 had a purchasing power equivalent, today, to just over 14 cents. A reasonable proposal would be for the Mint to create a new fifteen cent coin and eliminate the penny, the nickel, and the dime. If a penny was good enough as the smallest valued coin in 1947, this new fifteen cent piece should be good enough as the smallest valued coin in 2025. Or, as an easy intermediate step that preserves a decimal currency system, just eliminate the penny and the nickel, making the dime the minimum denomination coin.
While we are at it, we should reconsider our paper currency denominations. The smallest denomination of paper currency in 1947 was the dollar bill. The purchasing power of that dollar bill in 1947 is the equivalent of just over $14 today. So, by the same argument as the penny, if a one dollar bill was good enough as the smallest paper money in 1947, then a new $15 minimum denomination paper money bill ought to be good enough in 2025. But again, to preserve that decimal currency system, we could just eliminate the dollar bill and the five dollar bill, and that rarely used two dollar bill as well. This would make the ten dollar bill the smallest denomination paper note.
A dollar bill costs 3.2 cents to create and lasts about 5 years in circulation. A dollar coin costs 12.4 cents to create and lasts about 30 years in circulation. If we create a dollar bill, over the next 29 years the cost to maintain that dollar bill in circulation, replacing it every five years, is in present value and using an inflation adjusted interest rate of 2 percent (roughly the ‘real’ interest rate paid on TIPS0) is, roughly, 15 cents. In contrast, if we create a dollar coin, over the next 29 years the cost to maintain that dollar coin in circulation is 12.4 cents. This is not a large difference, but there are 12.7 billion dollar bills in circulation, so if that were instead 12.7 billion dollar coins, we would save 2.6 cents on each, or $33 million.
The smallest euro paper currency in circulation is 5 euro. This is one area in which the US might sensibly follow the Euro area.