How America Fell in Love With Cocaine Again

Summary

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Podcast Summary

Podcast: WSJ What’s News
Episode: How America Fell in Love With Cocaine Again
Date: September 17, 2025
Host: Alex Osola

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Episode Overview

This episode of "What’s News" delivers a compact yet comprehensive look at the most pressing economic and social developments shaping markets and American society. Lead stories include the Federal Reserve’s latest interest rate cut (its first in nine months), rising economic inequality in the US, and the resurgence of cocaine use driven by shifting cartel dynamics and governmental focus on fentanyl. Expert guests provide context and insight into why these changes are occurring and what they mean for everyday Americans.

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Key Discussion Points and Insights

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1. The Federal Reserve’s Interest Rate Cut and Political Dynamics

Segment: 00:31–05:13
Guests: Spencer Jacob, WSJ Investing Columnist

• Main Story: The Fed cuts rates by a quarter point, first time in 2025, with intent to lower rates two more times within the year.
• Motivation: Chair Jerome Powell cited the need to balance the dual mandate of maximum employment and price stability, acknowledging emerging cracks in labor market strength.
  • Jerome Powell (as paraphrased): "We're reacting to the much lower level of job creation and other evidence of softening in the labor market…warrants a change in policy." (01:37–02:02)
• Analysis:
  • Cut was expected; no surprise for markets (02:11)
  • Fading ambiguity around inflation tolerance as Powell signals willingness to allow inflation to run higher to support jobs.
  • Debate about politicization of the Fed—the presence of only one dissenting vote (likely new Governor Stephen Myron) carries outsized political weight, especially given the White House’s push for aggressive cuts.
  • Markets largely anticipated the cuts; immediate reactions were muted on Wall Street.
• Notable Quote:
  • Spencer Jacob: “It is probably the strangest Fed meeting ever. You had two people at the meeting, one who…the newest member's boss was trying to have fired…So, yeah, it was a very, very strange Fed meeting.” (03:18–04:18)

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2. Market and IPO Reaction

Segment: 05:13–06:16

• Market Response:
  • Major indexes ended mix: Dow up 0.6%, S&P 500 down 0.1%, Nasdaq down 0.3%.
  • StubHub’s IPO faltered—down more than 6% on debut, making it a “rare laggard in a red hot summer for IPOs.”
• Insight:
  • The tepid reaction reflects pre-existing optimism baked in—no shockers in Fed’s action.

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3. The Resurgence of Economic Inequality—the “Two-Speed” Economy

Segment: 06:46–09:05
Guest: Gene Whalen, WSJ Economics Reporter

• The Widening Wealth Gap:
  • Recent years saw low-income workers narrowing the wage gap thanks to pandemic-era labor shortages and faster wage growth.
  • Now, divergence is re-emerging: Wealthier (often older) Americans fare well due to strong housing and financial assets; young, low-income, and Black workers face setbacks—higher unemployment and slower wage growth.
  • Homeownership is critical: Wealthier Americans’ homes up 50% in value, leaving others further from buying in.
• Impact:
  • Luxury spending remains strong, especially in housing and high-end goods.
  • Lower-income consumers are forced to cut back more sharply.
• Notable Quote:
  • Gene Whalen: “Wealthier people are now sitting on homes that are 50% more valuable, whereas people on the lower end of the income range and young people feel further away from homeownership than ever.” (07:57–08:37)

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4. Cocaine Use Surging in America: Supply, Cartels, and Drug Policy

Segment: 09:14–11:14
Guest: Santiago Perez, WSJ Deputy Editor for Latin America

• Key Insights:
  • Cocaine consumption in the western US has risen 154% since 2019, and up 19% in the east, with retail cocaine both cheaper and purer than in years past.
  • Colombia’s cocaine output is at a record high; supply chains now favor quick shipments from Colombia through Ecuador to Mexico’s Pacific coast.
  • The Jalisco and Sinaloa cartels, longtime rivals, are cooperating to streamline trafficking into the US, flooding the market and driving down prices.
• Policy Shift:
  • US and Mexican authorities have shifted enforcement focus toward fentanyl—for example, more attention on Sinaloa’s operations in northwestern Mexico.
  • US federal resources are also stretched due to a focus on mass deportations and border enforcement, leading to fewer drug investigations.
  • This enforcement pivot created an “opening” for cocaine traffickers.
• Notable Quote:
  • Santiago Perez: “A lot of federal agents and federal law enforcement in general has been required to focus on detaining illegal migrants. So that's affecting federal investigations and drug enforcement.” (10:33–11:14)

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Memorable Moments and Quotes

• On Strangeness at the Fed:
  • Spencer Jacob: “It is probably the strangest Fed meeting ever. You had two people at the meeting, one who…the newest member's boss was trying to have fired…So, yeah, it was a very, very strange Fed meeting.” (03:18–04:18)
• On Economic Divide:
  • Gene Whalen: “Wealthier people are now sitting on homes that are 50% more valuable, whereas people on the lower end of the income range and young people feel further away from homeownership than ever.” (07:57–08:37)
• On Cocaine Surge and Enforcement:
  • Santiago Perez: “A lot of federal agents and federal law enforcement in general has been required to focus on detaining illegal migrants. So that's affecting federal investigations and drug enforcement.” (10:33–11:14)

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Timestamps for Major Segments

• Fed Rate Cut and Analysis: 00:31–05:13
• Market Reaction and StubHub IPO: 05:13–06:16
• Two-Speed Economy / Inequality: 06:46–09:05
• Cocaine’s Resurgence & Cartel Dynamics: 09:14–11:14

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Thematic Summary

This episode intertwines market dynamics, economic inequality, and the far-reaching effects of policy on both drugs and personal finance. The hosts and expert guests deliver succinct analysis: America’s economic divides are growing, markets are reacting with caution, and a shift in governmental priorities on drug enforcement has unwittingly led to a new cocaine boom—all stories that chart America’s ongoing transformation in 2025.

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Transcript

[A]

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[B]

What the Fed's decision to lower rates says about its shifting priorities. Plus why the gap between the rich and the poor in the US Is widening again and how America's war on fentanyl created an opening for cocaine.

[C]

The Jalisco Cartel. They reached a deal with their former rivals of the Sinaloa cartel and that organization is now using the routes to move the cocaine from southern Mexico to the U.S. southern border with her.

[B]

It's Wednesday, September 17th. I'm Alex Osola for the Wall Street Journal. This is the PM edition of what's News, the top headlines and business stories that move the world today. The Federal Reserve has lowered interest rates by a quarter point, its first cut in nine months. It also signaled that it would cut rates two more times this year. In his remarks to reporters, Fed Chair Jerome Powell highlighted the tension for the Fed's dual mandate goals of maximum employment and stable prices, and he defended the central bank's pace of change.

[D]

Certainly now I feel like our policy has been doing the right thing so far this year. I think we were right to wait and see how tariffs and inflation and the labor market evolved. I think we're now reacting to, you know, to the much lower level of job creation and other evidence of softening in the labor market and saying, well, those risks are maybe not fully balanced, but moving in the direction of balance now. And so that that warrants a change in policy.

[B]

For more, I'm joined by WSJ investing columnist Spencer Jacob. Spencer, this is the first interest rate cut in 2025. What do you make of this?

[E]

Well, the cut itself was exactly as expected. And in terms of what to expect for the rest of the year, that's also very close to expectations. The likelihood as expressed by the futures market got a little higher for two more cuts this year, but that was already more or less a done deal. There were other surprises, but that was not a surprise.

[B]

Powell mentioned this tension between the Fed's dual mandate of price stability and maximum employment. How do we see that balance developing?

[E]

You know, they had been somewhat vague about it since August. There's been suggestions that they're concerned about the labor market. And so they were going to tolerate more inflation. And he kind of explicitly said it. And so the ambiguity is starting to fade away. They'll allow inflation to be a bit higher for a bit longer in order to nip any weakness in the economy and the labor market in the bud.

[B]

Before this meeting, we had been talking on the show about how this was a bit of a strange one, in part because this was the first meeting of new Fed Governor Stephen Myron. Did we see any dissent among the Fed's Board of Governors for this rate cut?

[E]

We did and we didn't. And yeah, you're absolutely right in calling it a strange meeting. That's the understatement of the year, because it is probably the strangest Fed meeting ever. You had two people at the meeting, one who, up until last night, the newest member's boss was trying to have fired Lisa Cook unsuccessfully so far, and Powell had abuse heaped on him. So, yeah, it was a very, very strange Fed meeting. We did and didn't have dissent in the sense that the vote was 11 to 1, which does not show much dissent. But the dissenter very likely was Stephen Myron, who said just less than 48 hours on the board and simultaneously works the president. And you've had the President himself calling for 300 basis points in cuts. And so that leaves a question mark there. In terms of once the Fed might be, over time, more politicized, what they're going to do, how aggressive they're going to be in order to further the President's goals or further political goals explicitly, which the Fed is not supposed to do.

[B]

We were saying on yesterday's show that investors would be looking at how many more rate cuts are expected to come this year. Will they be satisfied by this?

[E]

In terms of the near term outlook, there's nothing to upset people. They were thinking that three cuts were very likely. Three cuts are just a little bit more likely in terms of very distant cuts. I'm talking about like the end of 2026. But the market needs to digest this. There are expectations there that the political pressure will grow and the politicization of the Fed will succeed. And so that leaves a big question mark for, let's say, 2027 and beyond stock investors who are very short term focused. They're basically happy in terms of bond investors who are longer term focused. Few things to think about.

[B]

That was WSJ investing columnist Spencer Jacob. Thank you, Spencer.

[E]

Thank you.

[B]

The Fed's decision to cut interest rates left markets feeling pretty meh Major US Indexes ended the day mixed. The Dow was up about 0.6%, while the S&P 500 and the Nasdaq were down about 0.1% and 0.3%, respectively. The lukewarm reaction is actually what many investors and analysts expected, given how much stocks and bonds had already rallied heading into this week's Fed meeting. Shares of Ticket marketplace StubHub dropped more than 6% in their new York Stock Exchange debut today, making the firm's first trading day a rare laggard in a red hot summer for IPOs. The company's shares rose as high as nearly $28 before falling to close at $22. StubHub priced its initial public offering yesterday at $23.50 a share. Coming up, the two speed economy is back in the U.S. that's after the break.

[F]

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[B]

There are two economies in the US right now, and they're moving in different directions. The divided fortunes of rich and poor in the US May sound like an old story, yet in recent years, workers on the low end of the spectrum began modestly narrowing the gap as acute labor shortages enabled them to switch jobs to and bargain harder for better wages. Data from the bank of America show that wages for the bottom third of US Earners grew at a faster rate than for the top third. Now, though, since the start of the year, the gulf is widening. For more, I'm joined now by WSJ economics reporter Gene Whalen. Jean who is doing well and who's doing not so well?

[G]

The people doing well are generally wealthier and older Americans. They are people who have higher incomes, people who have long owned homes and have savings in their 401k or other stock portfolios that have really risen a lot in value. The people not doing well tend to be younger, the lower wage workers. So younger Americans, low income workers, black workers have had a big jump in unemployment over the last years. So some of those groups really are in the unlucky bucket at the moment.

[B]

What is fueling this divergence?

[G]

One of the big things fueling the divergence is the fall off in wage growth for low Income workers. So really during the pandemic, we had this acute labor shortage. So workers at the low end of the spectrum were really in high demand. And now their wages are ticking up much, much more slowly than for wealthy Americans. Whether you are a homeowner or not is a huge factor. So that divergence in home ownership has really also widened the gap between rich and poor. Wealthier people are now sitting on homes that are 50% more valuable, whereas people on the lower end of the income range and young people feel further away from homeownership than ever.

[B]

So this split between the rich and the poor is happening. Where are we seeing the economy being affected by this?

[G]

Well, we're seeing it in the housing market. We're seeing a lot of home sales far above levels where they were five years ago. We're seeing still brisk purchases of things like high end sneakers and other types of luxury apparel. So wealthier folks still feel quite emboldened to spend, whereas lower income people are really cutting back.

[B]

That was WSJ economics reporter Gene Whalen. Thank you, Gene.

[G]

Thank you.

[B]

America loves cocaine Again, the drug sold in the US Is cheaper and as pure as ever for retail buyers. And according to the drug testing company Millennium Health, consumption in the Western US has increased 154% since 2019 and is up 19% in the Eastern part of the country during the same period. Santiago Perez is the Wall Street Journal's deputy editor for Latin America and joins me now. Santiago, what is behind this rise in cocaine use in the US what we're.

[C]

Seeing now is record cocaine output in Colombia. And as a result, you see increased shipments across the Pacific corridor from Colombia to Ecuador. And then you have speedboats essentially smuggling tons of cocaine to Mexico's southern Pacific coast. And now the Jalisco cartel, they reached a deal with their former rivals of the Sinaloa cartel, and that organization is now using the routes to move the cocaine from southern Mexico to the US Southern border. And what you're seeing also is a drop in prices because of this excess supply.

[B]

Have US Government policies affected the situation at all?

[C]

Well, you have two elements. On one hand, the Trump administration has focused more on fentanyl smuggling and so has Mexico. And most of the attention has centered on the Sinaloa cartel in northwestern Mexico. Then on the other hand, what's happening inside the US Is that because of a focus on mass deportations, our understanding is that a lot of federal agents and federal law enforcement in general has been required to focus on detaining illegal migrants. So that's affecting federal investigations and drug enforcement.

[B]

That was WSJ deputy editor for Latin America, Santiago Perez. Thank you, Santiago.

[C]

Thank you.

[B]

And that's what's news for this Wednesday afternoon. Today's show is produced by Pierre Biennime and Rodney Davis, with supervising producer Michael Cosmides. I'm Alex Osola for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for. Listen.