Is Washington replacing New York – and more specifically, Wall Street – as the city that drives America?

As a little boy, I used to marvel at the bright yellow Caterpillar (NYSE:CAT) trucks in the middle of construction fields and think to myself “that’s freaking awesome!”.

U.S. economy shrank at fastest pace in nearly 27 years… Procter and Gamble down after cuts full-year forecast… Exxon, Chevron gain after beating expectations… Dow, S&P, Nasdaq all off about 1 pct…

Tuesday, the Dow fell 38 points. But the real action is in the gold market – the price rose to $908 per ounce. Even the gold miners are finally going up. What does it mean? Is inflation closer than we thought?

The unemployment picture took on an even more ominous tone this week as new layoffs emphatically underscored a worsening global economy.  Now, fear is rising that the losses represent a major restructuring in the business world and that some, if not most, of the jobs are gone forever.

It came as no surprise to me that both gold got sold off a bit the moment that the gold market opened in the Far East on Monday morning. But it didn’t amount to much, because shortly after 2 p.m. in Hong Kong…1:00 a.m. Monday morning N.Y. time…gold began a slow rise that continued right through the London open. This lasted until the silver fix in London (noon) before selling off about ten bucks. But as soon as floor trading opened on the Comex in New York, the price rose…then spiked to its high of the day…before it was gently capped and then got slowly sold off until the end of Globex trading at 5:15 p.m. Eastern time.

The base metals were mostly in the green on Monday. Copper turned in a second strong day in a row, rising from the pre-dawn hours to the noon hour, before tapering off to finish at $1.5404/lb., up 15 cents.

Caterpillar Inc., (CAT) predicted zero economic growth worldwide in 2009 and announced it will shed 20,000 jobs over the next few months. The world’s largest maker of construction and mining machines issued its gloomy forecast after a downturn that began in the United States grew into a full-blown global recession, gutting orders for its equipment.

There is a full economic calendar this week, but all eyes will be on the two-day FOMC meeting and the rate decision on Wednesday.

It will be interesting to see how the FOMC approaches this meeting. The current Fed Funds target rate is 0-0.25%, which in and of itself is rather strange. It is a moving target, not a fixed rate. Who determines which rate is used? My guess is this meeting will be used to clarify what the rate is. The Fed will either officially reduce it to 0% in a continued effort to resuscitate the economy, or lock it in at 0.25%. This would at least leave the Fed with one perceived bullet in the gun.

The rest of the…

Investors can look forward to a great infrastructure boom in 2009, says Frank Hemsley. All around the world, major public works programs are preparing to come online. Frank says international companies like Caterpillar (NYSE:CAT) and ABB ltd (ADR:ABB) stand to make big gains this year. Investors can also buy into the many sector ETFs related to infrastructure building.