This is no time for risk-taking.

I’ve been warning for months about deteriorating credit conditions and the urgent need to park your cash balances in government-only securities or mutual funds that are strictly designated “government” or “Treasury” money-market funds.

The entire world is now running hard to buy government bonds, both Treasuries and foreign government bonds like German bunds. Yields continue to decline.

The ongoing crash in credit markets confirms this strategy since everything else is now declining sharply in value, even investment-grade corporate bonds and municipal bonds.

Investors should hold ONLY government debt.

If you’re an American, this means short-term Treasury bonds and ninety-day T-bills, which can be purchased through a broker.

Equally, a government designated Treasury money-market fund, like Vanguard Admiral Treasury Fund (VUSXX), charging just 0.10% per annum ($50,000 minimum), or the Vanguard Treasury Money Market Fund (VMPXX), charging 0.24% per annum and requiring a $3,000 minimum investment, are ideal. Both funds are secure, won’t break the buck and will protect your assets. I’d scramble to place my liquidity proceeds in Vanguard before most U.S. banks, except J.P. Morgan.

If you must stick with a bank, then head to J.P. Morgan Chase, the biggest institution in the United States. J.P. Morgan won’t fail. It also has liquidity and I highly doubt it will face a run on assets. Make sure you stay well below FDIC thresholds and inquire about any deposit insurance questions you might have directly with J.P. Morgan.

Government debt is now highly in demand. Treasury bills this morning sit at their lowest yields since the Japanese bombed Pearl Harbor in December 1941 at just 0.04%. These are Depression-era yields at the moment as investors dump everything and flock to safety. During the Great Depression benchmark T-bill yields actually turned negative! The odds of that happening again are not only likely but probably just days away as credit conditions are now literally frozen. The global credit system is effectively at a standstill now with lenders hoarding cash and denying liquidity to other banks and institutions.

Previously, I’ve also recommend two Lehman Brothers short-term Treasury bond exchange-traded-funds or ETFs in this column. No need to worry if you hold these safe securities. Barclays, the world’s largest ETF sponsor is now making a bid for Lehman’s range of fixed-income ETFs, including SHY and SHV. No need to sell these instruments. For the record, Lehman Brothers held one of the best-managed fixed-income trading and research desks in the business. It’s no wonder Barclays wants these prized assets, including Lehman’s bond team.

At some point I expect all of the Fed’s efforts, including help from other central banks, to finally put a lid on this crisis. Last night, global central banks injected almost $300 billion dollars into the financial system; liquidity is being pumped at an astonishing rate.

Until central banks win the battle against deflation, make sure you’re cash balances or portfolio liquidity is protected. Most banks and money-market mutual funds remain a high-risk place to park your cash. Buy only government securities.