The US federal government is certainly battered, bloodied, and taking on lots more debt than is likely healthy. However, our system will not fail anytime soon and we will likely even become a beacon of relative safety in a world economy that is rapidly collapsing.

Money market funds taking losses and slowing liquidity is worrisome, and everyone should take steps to safeguard their holdings. The advice above is a good first step, but there are other things you should consider.

Depending on where you are in your life-career spectrum, the weightings for the following options varies:

- Bonds ... start with a solid holding of varied government (mainly federal, but also municipal) issues, then consider high quality corporate debt that is high yielding and realistically not all that high risk. if going the corporate bond route, stick with relatively safe sectors of the economy, don't load up on Lehman bonds!
- TIPS ... Treasury Inflation Protected Securities: these are government bonds that adjust returns for inflation. I broke these into a separate category due to their supreme importance for inclusion into your portfolio!
- Preferred stock for relatively secure companies can yield high single digit fixed returns with exposure to potential cap gains. Again, stick with stock for secure companies!
- Portfolio insurance ... for the savvy investor who knows how to pick up market insurance products or execute insurance strategies, this is a good time to do so. This includes various shorting, puts on index shares, puts on index futures, or writing calls on any of these. Visit my site if you want to learn any of these strategies.

We're in such a new financial world, that the lessons of the past, may not apply today.

The government is testing new ground, in supporting bad debts, bad debtors and bad debtees (?)

Do the old rules apply?

Phil's right... it will be difficult to spot the right place to keep your money. 

We went to IBonds and feel comfortable about that, but even the Government is at risk.

The larger question, I think is whether there is any safe haven except perhaps gold? 

Mentioning Pensions at risk (with investments in risky products like hedge funds and even derivatives) is just one of the many things that are and will be affected by the "bail out". 

The former "safe" money holding places have not yet addressed the real value of their assets, and in particular their liquid assets.

Pension funds, endowment funds, insurance funds, and even solid gold annuity funds are all at risk when the assets that back the funds are "marked to market".  

All are backed by the federal government, but this is the government that runs the Pension Benefit Guaranty Fund, FDIC, Medicare, Medicaid andSocial Security... not one of which is currently adequately funded to handle even a mild economic downturn. 

The nation may be the proverbial frog in the pot of water on the stove.  The change takes place below the "JND" the "just noticeable difference". 

We don't take our money out, because 1. we don't have a good place to put it, because  2. we don't want to pay taxes and fees, because 3. the value will come back... "It always does." because 4. we know that our neighbor or co-worker is in the same boat, and he's hanging in there.  

In the past when we didn't take our money out, it DID come back.  And for the past 55 years this has been true.  But... Katrina and Ike were once in a lifetime occurrences, and we're in a financial once in a lifetime experience.  When the Market crashed in 1929, it never regained it's value until 1954. 

Look for advice, and then look around and see what other advice is available.  Don't be taken in by the calm advisor, who is reasuring you that it will all come out right in the end... unless he is going to put his personal guarantee in writing... backed by a credit check and lien on his house. 

Yeah... ya have to trust someone... but it's better to spend a few anxious moments in checking out your investment decision, than to automatically let someone invest your money because its an easier thing to do.  

Our Ibonds are currently paying an APR of 6.4, and we sleep well... but even at that I'm not so sure that the money is safe even there.

This isn't helpful, I know... but if it gives pause to making decisions, then it'll be worth it.

my opinion only

Money market funds which invest exclusively in direct Treasury obligations should be immune from any NAV fluctuations