There's glaring evidence that the next recession will be entirely different from any in recent history. Here's why experts worry we're ill-prepared to combat it

Wall Street was central to the genesis of the last two recessions, as it facilitated the bubbles that brewed in housing and software stocks. 

But the next recession is unlikely to be triggered by overpriced assets, according to the Economic Policy Institute, a Washington, D.C.-based think tank that recently published a report examining the next major downturn.

Josh Bivens — the EPI's director of research, who also authored of the report — focused instead on other causes that have been in the making during the nearly 10 years of economic recovery.

For starters, he said there's a "real possibility" that the US slips into recession within the next 18 months, thanks to excessive interest-rate increases and the fading impact of tax cuts. He echoed prominent economists like Paul Krugman and several Wall Street experts who see a heightened risk of a downturn by the end of 2020. Krugman, like Bivens, is concerned that we're not adequately prepared to handle the next shock.

"The US is poorly prepared for the next recession — but not for the reasons most people think (allegedly too-high public debt and too-low interest rates)," Bivens said in the report. 

Related: What does a recession mean for consumers? 

What Does a Recession Mean for Consumers?
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What Does a Recession Mean for Consumers?
With the threat of a recession looming above us, Americans are beginning to ask: What would a recession mean for me and my family?

The experts at take a look at how a recession could impact 13 facets of your financial life -- and what steps you should take to make it through the economic storm.

Click through our gallery to see what to expect and what you should or shouldn't do during a recession.

Next: If You're in Retirement ...
"These are the people who are most likely to be impacted by the decline we've seen in the stock market. The closer you get to retirement, the more of your assets should be shifted over to things that aren't going to lose their value. You're trying to preserve the value you've accumulated," says Tracy Clark, an economist with the W.P. Carey School of Business at Arizona State University.
' More on Recession & Retirement

Next: If You Own Stocks ...
Don't panic and start selling just because you hear warnings of a recession. You may be locking in losses that are not necessary, especially if the assets in your portfolio are being held for the long-term and you won't need them for ten or more years.

' More on Recession & Your Stocks

Next: If You Have a 401(k) ...
Unfortunately, it's impossible to "recession-proof" your 401(k), because no sector is immune from an economic slowdown. You can, however, take some precautions to limit the damage. For one thing, stay the course. Unless you are in dire financial straits, don't cut back or quit contributing to your retirement fund.

' More on Recession & Your 401(k)

Next: If You Need a New Car ...
With recession fears growing, it might not seem like a great time to think about a new car. But if you want (or need) a new vehicle you might actually be able to benefit from the challenging economic conditions. The combination of desperate auto makers, motivated auto dealers and lower interest rates makes it an auto buyers market.

' More on Recession & Car Buying

Next: If You Started a New Biz ...
If you've recently started your own business, the potential for a recession may have you in a panic. But there are ways to try to weather the storm. For example, try to diversify. Look for new types of customers or a new way to market your offerings. Also, continue to market yourself. It's tempting to cut back on advertising while money is tight. But, in fact, a downturn may actually require more marketing efforts to stay in the game.
' More on Recession & a New Biz

Next: If You Need a Loan ...
While a recession creates many economic woes, those who are in the market for a loan (mortgage or otherwise) can often find value during these times. Rates are low, which makes it a great opportunity to refinance your house or tap your home equity to fund a long-term worthwhile venture. There are some cautions, though. Click the link for more advice.

' More on Recession & Loans

Next: Consolidate Debt?
But for all but the most disciplined and job-secure of folks, consolidating your debts into your mortgage in a recession environment is possibly the worst thing to do. If rates should go up, or you suffer a sudden income reduction, it will be much harder to cover your mortgage payments. Plus: Having a clean slate with credit cards often has the wrong effect on people.
' More on Recession & Consolidation

Next: If Bank Has You Worried ...
Your bank accounts are FDIC-insured up to $100,000, but if you are staying up at night worrying over the solvency of your bank -- move your money. Why? Most banks are similar enough that there's really no reason to keep money with one that makes you worry.

' More on Recessions & Your Bank

Next: If You Have Card Debt ...
To protect your family and your finances during these very uncertain times, it is critical that you batten down the hatches and prepare to ride this out. One critical way to do that is by tackling your credit card debt. You DON'T need a lot of money to make an immediate dent in your debt. Armed with three simple steps and even $10 extra a month, you can take a big bite out of your credit card debt. Click on the link to get started.
' More on Recession & Card Debt

Next: Buying a House
Now may be the right time to begin investigating your home-buying options. We are in the throes of a double downswing of the costs associated with entering the single family home market. As real estate prices are deflating regionally, the interest rates on first mortgage loans to buy those properties are at rock-bottom levels. Deflated real estate markets aren't always bad things, when you're in the mood to buy some. Click below to see some of the things you should consider if you want to buy in today's climate.
' More on Recession & Home Buying
Next: Heading to College
Parents of college-bound seniors everywhere are blanching. A lot of financial ugliness is coming down the pike, and here you are, ready to be hit with a whole new phalanx of expenses. What's a parent to do? Strongly consider the community college option. Unless your kid got a full ride to their first pick university, It makes too strong financial sense not to examine this option closely.

' More on Recession & College

Next: Short on Cash
Freelance writers frequently lead a feast or famine lifestyle. Out of necessity, they learn how to prepare for funds running low. Here are some of their key tips: First off, in feast times, have a stash of cash, a couple hundred dollars tucked deep away. When you have NO MORE money at all, this stash will buy your kids' their milk and you a gallon of gasoline. Other tips: Save all change, know thy pawnshops, babysit or teach a class, if you've got skills to share.
' More on Recession & Empty Pockets

Next: If You're Laid Off ...
First things first: File for unemployment immediately. Don't miss any benefits you're due. Get some help with your resume and begin your job search right away. Then take a hard look at your family's budget and see where you can immediately cut costs. Come up with a worst-case scenario budget.
' More on Recession & Layoffs

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Instead, he said we're poorly prepared for reasons including policymakers' failure to rein in the power of the financial sector and to fight inequality.

Although Bivens counted out asset bubbles as the primary cause of the next recession, he doesn't let Wall Street off the hook completely. In fact, the way regulators treated Wall Street amid the 2008 recession is one contributing factor to why, in his view, we're ill-prepared to combat the next recession. 

The Federal Reserve rushed to the financial sector's aid to prevent it from collapsing during the last crisis. By 2009, measures of market stress, such as the spreads between Treasury yields and other interest rates, were back to normal. Stocks also started rallying.

The return to a sense of normal probably weakened the sense of urgency among regulators to ensure a recovery for all, not just Wall Street, Bivens said. And the repercussions will have to be confronted as the next crisis nears.

His other reason struck at the heart of what Bivens described as the underlying cause of most recessions: a slump in aggregate demand. Put simply, recessions happen as people curtail their spending en masse and the businesses they patronize respond by implementing cost-cutting measures including layoffs.

Inequality has worsened this dynamic, Bivens said. Low- and middle-income households tend to spend a higher share of their compensation than richer households. However, their wage growth has been sluggish for most of this expansion, thereby placing a cap on how much aggregate demand they have been able to generate.

As it stands, any sudden dent to their incomes would be damaging not just to the individuals but to the economy. 

It's not only households that have faced a ceiling on their ability to spend, according to Bivens. For most of the recovery, the US government was skittish about fiscal stimulus because of concerns about the level of debt. 

Ironically, this is exactly the tool needed to fight the next recession — not primarily Fed policy, in Bivens' view.

"A key lesson from the Great Recession is that fiscal policy is the most effective tool for aiding recovery," he said. "Monetary policy can lay the groundwork for fiscal policy, but really cannot be relied on to play more than a supporting role for fighting recessions."

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