Redenomination

An alternative to removing the smallest denomination of a currency is a process called redenomination. Redenomination is not the same as revaluation. Though the terms are similar and both deal with money, revaluation deals with exchange rates and pegging a currency to another.  We are talking about redenomination which is changing the currency itself into a new currency.  Redenomination typically happens when inflation or hyper-inflation has eroded the value of a currency so much, that everyday transactions are expressed in thousands, millions, billions, or even trillions of units of a currency.  Eventually, like they did in Zimbabwe, nations will drop a bunch of zeros off the end so that a unit of the "new" currency, for example, will be worth 1,000 or 1,000,000 units of the "old" currency.  In relatively stable economies, usually this causes only a temporary decrease in stability, after which things go back to normal.  But, in highly volatile economies, this is usually the beginning of the end.   Most recently, most of Europe has gone through a redenomination, converting to the Euro.  Of course the main problem with redenomination is that you have to print currency in the new denomination, mint coins in the new denomination, and have a transition period where people can trade in their old currency and coins for the new, and where everyone can spend either the new or the old or both.
Would this be a good idea for the US? Probably not yet. Maybe when the dollar is about as valuable as the penny is today. Sort of like the Japanese Yen. It's worth about one cent. I think Japan needs to start thinking about redenominating their currency.  Maybe they already are.
The problem with redenomination is that there is usually a brief spike of inflation after the transition period, especially if the new denomination has the same name.  Let's drop only one 0 from the current prices.  Your old salary of OldUS$30,000 per year is now NewUS$3,000.  If you make OUS$100,000 now you make NUS$10,000.  But now gas instead of being OUS$4.00 a gallon, is now NUS$0.40.  OUS$60.00 video games, now only cost NUS$6.00.  Initially we are in the same position as before, only things are valued a little differently.  Now after the transition period ends, throw in a quick spike of inflation where everything costs 10 to 20% more than before within a couple years, but your income only goes up by 5%.  Hello recession! This is usually why redenomination is not a good idea.  Especially to drop only 1 or 2 zeros. I think we have quite a long time before we need to think about redenomination.  Eventually we can get rid of cents and fractions of a dollar.  Then when a dollar becomes a lot less valuable than the penny is today, we can think about redenomination.  Retiring coins like the penny has virtually no economic impact.  Redenomination goes for the economic jugular.  It's only for when the currency can no longer handle the current economy.
So let's just drop the penny and move on.  The economy is not going to deflate anytime soon, so we've got nothing to lose, we'll only be saving billions of dollars.