Alternatives to Government Bonds

Just recently, I've decided to sell all my government bonds for three reasons. The first reason is that I believe there could be a government bond price crash on the way. Secondly, I've just finished reading an introductory book on the Austrian School of economics. The Austrian School differs in many respect to the mainstream views of Keynesian economics, one of the most significant being the idea of government deficit spending. Keynesian economics recommends a government borrow money (by issuing government bonds) and spend beyond its current means to kick-start a slowed economy. The Austrian School feels that this is unsustainable, and I decidedly agree. For more details, see the link above to my other blog post about government bonds. My last reason is related to the second: I feel a moral opposition to holding my own government in debt to myself. I disagree with deficit spending, and it doesn't feel right to me, similar to how a banker shouldn't feel right lending more money to an already debt-burdened borrower, knowing full well that the borrower can't pay it back.

So, having decided the above, what should I replace my government bond holdings with? Government bonds are the go-to fixed income investment. They're typically safe (just pretend to ignore what's going on in Europe right now), and make a good hedge against stock market price movements and the risks of the equity portion of your portfolio. After some initial research, I've come up with some possible alternatives to holding government bonds. An alternative should fulfill the same requirements that government bonds do: produce income, provide safety, and price movements are independent of the stock market. Not all the suggestions below fill all the requirements perfectly, but they're what I've come up with so far.

1. Corporate Bonds - Most bond funds have some corporate bonds thrown into their mix. Corporate bonds tend to be riskier than government bonds, but they also tend to have higher yields. Corporate bonds satisfy the income requirement. However, corporate bond prices can take a hit just as hard as the stock market in an economic downturn. At least if a corporation goes bankrupt, the bond-holders are paid off first, then the preferred share holders, then the common share holders, so at least there is some safety.
2. REITs and Real Estate - Many people are still very wary about real estate exposure since everything that happened in 2008. However, if you're holding quality real estate investments that produce income (such as an REIT), rather than buying for the sake of capital gains, real estate can easily make up a significant chunk of a portfolio. Typical model portfolios I've seen on the web always seem to have "just a smidgen" of real estate exposure. If one does proper research, I don't see why real estate can't compose 10-20% of a portfolio. Real estate prices are supposed to move independently of the stock market, although that hasn't always been true in recent years. If safety is important, consider real estate investments such as companies that rent out to grocery stores and other essentials. Even in 2008, people still had to buy food, which means grocery stores were there paying rent so they could supply food.
3. GICs and Market-Growth GICs - While GICs typically offer very low yields, they are still a possibility. Another alternative is the market growth GIC. If you buy one of those, you could earn interest anywhere from 0% to some ceiling, depending on how the stock market performs over that period of time. While your principle is always guaranteed, you should be comfortable with the fact that at the end of the term, you may not end up earning any interest at all.
4. Gold - This last list item doesn't produce income, although I'm starting to give it consideration. Gold prices tend to increase as inflation increases, and governments always seem to be printing more money to pay off their debts and causing inflation. This could make gold a safe investment. There are many ways to get exposure to gold, and I'm researching more on the topic.

My holdings in government bonds currently consist of mutual fund units that can't be sold for 90 days since purchase without incurring an early-sale penalty fee. I intend to stop purchases and wait the 90 days to digest the information I've stated above and to consider alternatives. I might post back again in 2012 about what I decide.