Why the Penny Is So Over

FROM THESTREET.COM: 

The lowly penny is in a pinch.

It should probably retire peacefully and let the nickel slide down to the bottom of the coin hierarchy.

But nostalgia is keeping it from going the way of the manual typewriter.

In fact, two-thirds of Americans want to keep the penny as legal tender according to a 2006 CoinStar study.

But doing so comes at a price.

Treasury Secretary Henry Paulson has said he believes it would make sense for the U.S. to get rid of the penny. When looked at from a personal-finance perspective, it makes a lot of sense (no pun intended), but Paulson also said that it was not something that he thinks will be done soon due to a current lack of political will.

The penny may be a piece of nostalgia, but here's why it may be time to say goodbye to it:

1. Pennies Cost More Than They're Worth

There was a solid argument for keeping the penny when the government made money with every penny that was made. When it only costs 0.8 cents to make each penny, the billions of pennies created each year and placed into circulation actually created an income source for the government, but that is no longer the case.

Pennies made since 1983 are made of 97.5% zinc with a thin copper coating. Since 2002, both zinc and copper have significantly increased in price. Today it costs the government approximately 1.2 cents in raw material and production costs to make each penny and the cost has been as high as 1.7 cents to do so in the past.