There is a key difference between change and transformation.

We often speak of “change”–as a potent political slogan, as a permanent feature of life, as a “good thing”–but we rarely speak of the often-wrenching process of change. I think the reason is self-evident: change often involves loss.

This is why Kubler-Ross’s five stages of grief –denial, anger, bargaining, resignation and acceptance–have become an increasingly mainstream model of the process of coming to terms with the losses of declining asset valuations, a devolving economy and a lower standard of living.

But change is not just about loss and grieving, though it may include those attributes; it’s also about transformation. While I am sympathetic to the process of accepting losses, it is the process of transformation which motivates and inspires me.

That the Status Quo–dependent on ever-rising debt and asset values, on cheap, abundant energy, food and other resources–is unsustainable, is self-evident to all not firmly lodged in the cocoon of self-deception and magical thinking known as denial. It follows that the Status Quo will devolve or implode within the next 10-15 years, and be replaced by some other arrangement.

Precisely what that arrangement will be is what I term the Great Transformation. The proper way to think about this great social and economic transformation is to think of personal transformation, for as correspondent Bart D. recently observed, “society is a fractal function of the individuals of which it is composed,” which boiled down to its essence means the process of transformation scales up from an individual to a household, group and eventually to an entire culture in a self-same fashion.

In other words, the process of transformation is essentially the same all along the spectrum.

Transformation requires a person face that their fantasy-self–the one who always makes a good decision, is always in control, always caring and selfless, etc., is not real. The person must then come to terms with their real self, which includes positive traits and also all those elements which are difficult to accept because they are not god-like strengths but very human frailties: weakness, selfishness, indecision, fear and a host of other unappealing faults.

This is also true of entire societies. As a nation, we cling to a fantasy version of the U.S., as a powerful, “can-do” innovative country of limitless wealth and freedom. The reality is much less attractive, and yet rather than face up to the darker aspects of America we are in a stage of denial saturated with rage.

In our fantasy view, iPads (made in China) are proof of our god-like innovation; so deep is the appeal of this magical thinking that we are blind to the reality that we are mired in failed policies and tragically outdated ways of thinking; innovation in mainstream healthcare, education, governance and the rest of our key structures is essentially non-existent. We are a bloated, high-cost, rigid, fragile, fractured society frozen in a profound political disunity strongly reminiscent of the Roman Empire just before its collapse.

Just like the ancient Romans, we cling to magical thinking, as if a glorious past will magically repeat itself without any effort or sacrifice on our part; rather than confidence about the future, our primary emotion is fear, and our primary defense is denial.

Measured by the dominance of self-serving Elites, we are nothing but a large-scale banana republic, a simulacrum of democracy with limitless high-quality official propaganda masking an economy and political machinery completely ruled by a tiny, utterly self-serving financial and political Elite. Just as in banana republics we once scorned, a shadow system of governance actually rules, while a phony facade of “democracy,” “rule of law” and “liberty” is propped up by a servile mass media of bought-and-paid-for toadies.

Individually, we have surrendered our autonomy for complicity in the charade: We want the Savior State to keep paying our bills, and we don’t care how it does so. We are terrified by the possibility that the Savior State might implode, even as we recognize it is also a dangerous force of oppression dominated by a self-serving financial Elite.

The typical first reaction to this unwelcome reality is anger, triggered by an awakening self-loathing: we only “like” the fantasy self and the fantasy nation, and we actively dislike and fear the weak, vulnerable, anxiety-ridden real self and the high-cost, rigid, conflicted, incapacitated, fear-driven real nation.

The process of transformation boils down to integrating the various conflicted parts of the self into a complete being that is accepted and nourished for what it is, a dynamic mix of impulses, habits, tropisms, thoughts, emotions and actions.

On a social and national level, we must accept that self-indulgence and passive acceptance of debt-serfdom and political servitude are not successful models of transformation. We have no models for decentralizing our economy and consuming less resources; we will have to invent them, and that is the innovation we desperately need, not the childish “innovations” of distracting tech toys.

The person who has never gone through this profound process often fears what will be uncovered; ironically, we fear the discovery of our true self, and cling to the fantasy-self which is fundamentally the cause of our problems and anxiety.

In other words, we fear the process that will make us whole and bring us a grounded well-being because at the start of ther process, the end result is unknown. The leap requires self-confidence and faith. The person–and the society–grounded in realistic appraisals and self-knowledge is not afraid of transformation or the stiff challenges of the future; the self-aware person meets the future with confidence, and has no desire to cower in denial and spew the rage born of abject insecurity.

If we want to move forward to a healthy realism, then we have to move beyond denial, magical thinking and the self-loathing that comes with recognition of our weaknesses and anxieties.

As a nation, this will require accepting that we can no longer consume unlimited supplies of energy at low prices, and print unlimited sums of paper money to support our Elites and asset prices. We must accept that allowing the nation to operate for the benefit of a self-serving Elite is not serving the interests of the lower 99.9%.

One of the key stages in the process of change is to accept responsbility for where we are right now, and fashion a realistic response. Offering some ideas on what constitutes a realistic response and plan of action is the subject of my books Survival+ and An Unconventional Guide to Investing in Troubled Times.

We are not victims, helpless, or trapped. There are things we can do to improve our resiliency, sustainability and well-being. We can opt out of supporting the Elite-dominated Status Quo, and actively pursue parallel, decentralized modes of enterprise and living that are not complicit in the domination of the nation’s destructive financial and political Elites.