WSJ What’s News - How America Fell in Love With Cocaine Again

Episode Date: September 17, 2025

P.M. Edition for Sept. 17. Cocaine use is rising in the U.S., in part because of an excess supply smuggled in by Mexican cartels. WSJ deputy editor for Latin America Santiago Pérez joins to discuss why, and how Trump administration policies may play a role. Plus, the Federal Reserve lowered interest rates by a quarter point today. We hear from WSJ investing columnist Spencer Jakab about how the central bank is shifting its priorities. And after poorer workers closed the gap with the rich in recent years, the gulf is now widening again. WSJ economics reporter Jeanne Whalen talks about what’s causing the growing rift. Alex Ossola hosts. Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

Protecting your nest egg, no matter what the market does, most people call that the smart money. At American National Insurance Company, we call it a multi-year guarantee annuity. Fund your annuity online at annuities.americanational.com. 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 U.S. is widening again. and how America's War on fentanyl created an opening for cocaine. The Halisco 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.

It's Wednesday, September 17th. I'm Alex Oslo for the Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world to day. 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. 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 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 warrants a change in policy. 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? 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. Powell mentioned this tension between the Fed's dual mandate of price stability and maximum employment. How do we see that balance developing? 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. 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? We did and we didn't. And, yeah, you're absolutely right and calling at 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 red 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 set 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. 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?

In terms of the near-term outlook, there's nothing to upset people. They were thinking the 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. That was WSJ Investing columnist Spencer Jacob. Thank you, Spencer. Thank you. The Fed's decision to cut interest rates left markets feeling pretty meh. Major U.S. indexes ended the day mixed. The Dow was up about 0.6 percent, while the S&P 500 and the NASDAQ were down about 0.1 percent and 0.3 percent, 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. dollars. Stubhubh priced its initial public offering yesterday at 2350 a share. Coming up, the two-speed economy is back in the U.S. That's after the break. Protecting your nest egg, no matter what the market does, most people call that the smart money. At American National Insurance Company, we call it a multi-year guarantee annuity. Fund your annuity online at annuities.

There are two economies in the U.S. right now, and they're moving in different directions. The divided fortunes of rich and poor in the U.S. 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 and bargain harder for better wages. Data from the Bank of America show that wages for the bottom third of U.S. 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. Gene, who is doing well and who's doing not so well? 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 year. So some of those groups really are in the unlucky bucket at the moment. What is fueling this divergence? 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 homeownership 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. So this split between the rich and the poor is happening. Where are we seeing the economy being affected by this? 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. That was WSJ economics reporter, Gene Whalen. Thank you, Gene. Thank you. America loves cocaine again. The drug sold in the U.S. is cheaper and as pure as ever for retail buyers. And according to the drug testing company Millennium Health, consumption in the Western U.S.

has increased 154 percent since 2019 and is up 19 percent 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 U.S.? What we're 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 U.S. southern border.

And what you're seeing also is a dropping price because of this excess supply. Have U.S. government policies affected the situation at all? Well, you have two elements. On one hand, the Trump administration, 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 U.S. 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. That was WSJ Deputy Editor for Latin America, Santiago Perez. Thank you, Santiago. Thank you. And that's what's news for this Wednesday afternoon. Today's show is produced by Pierre Bienname and Rodney Davis with supervising producer Michael Cosmites. I'm Alex Oscella for the Wall Street Journal.

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