ARROYO GRANDE, Calif. (MarketWatch) -- Remember that big ah-ha moment in the 1939 classic "The Wizard of Oz?" Dorothy wants to see the Wizard. His voice booms: "Do not arouse the wrath of the Great and Powerful Oz! Come back tomorrow!" Afraid, Lion, Tin Man, Scarecrow shake. Dorothy's dog runs up, tugs on a curtain. She chases Toto, pulls curtain open:

"Who are you?" Dr. Marvel stutters: "Well, I - I - I am the Great and Powerful, Wizard of Oz." Dorothy: "You are? I don't believe you!" He replies: "No, it's true. There's no other Wizard except me." Dorothy's miffed: "Oh, you're a very bad man!" Wizard: "Oh, no, my dear. I'm a very good man. I'm just a very bad Wizard."

2009 Sequel: Script exposes diabolical cover-up conspiracy

Flash forward: Real life, Washington, new leaders, a new Congress, old wizardry. Be forewarned: No matter who's elected president, America will soon see a massive statistical curtain pulled back, exposing a con game of historic proportions. And when that happens, you and I will suffer another ear-splitting global meltdown, bigger than today's housing-credit crisis, dragging us deep into a recession and bear market for years.

Cast: New 'leading man' from old Nixon political machine

Yes, the lead character pulling back the curtain is none other than Kevin Phillips, a former Republican strategist for Nixon, and today America's leading political historian. Phillips just published "Bad Money: Reckless Finance, Failed Politics & the Crisis of American Capitalism," everything you need to know about today's credit meltdown.

Scene 1: Numbers racket hiding behind Washington curtain

Opening shot: Phillips pulling back the curtain, exposing charlatan Wizards in a brilliant Harper's Magazine article: "Numbers Racket: Why the economy is worse than we know." Far worse. Buy it, read it -- this is essential reading if you really want to understand the depth of today's political as well as economic impending meltdown, and the harsh realities facing Washington, Wall Street, Corporate America, and Main Street in 2009 and beyond ... harsh because we cannot cover up the truth much longer.

Scene 2: Statistics, Washington's new WMDs, a time bomb

"If Washington's harping on weapons of mass destruction was essential to buoy public support for the invasion of Iraq, the use of deceptive statistics has played its own vital role in convincing many Americans that the U.S. economy is stronger, fairer, more productive, more dominant, and richer with opportunity than it really is. The corruption has tainted the very measures that most shape public perception of the economy," especially three key numbers, CPI, GDP and monthly unemployment statistics.

Scene 3: Backflash, 'It's always the cover-up, stupid!'

As I read further I couldn't help but think about similar traps politicians get themselves (and us) into. Remember nice guys like Scooter Libby and Bill Clinton: The crime wasn't their original stupidity, but their lying during the cover-up. Here, Phillips reviews endless statistical cover-ups since the 1960s and concludes there was no "grand conspiracy, just accumulating opportunisms." I call it plain old greed. And every step of the way the media went along with the con game played by politicians and economists.

Scene 4: Real numbers torture us ... like water-boarding!

How bad is it? "The real numbers ... would be a face full of cold water," says Phillips. "Based on the criteria in place a quarter century ago, today's U.S. unemployment rate is somewhere between 9% and 12%; the inflation rate is as high as 7% or even 10%; economics growth since the recession of 2001 has been mediocre, despite the surge in wealth and incomes of the superrich, and we are falling back into recession."

Scene 5: Most economists hushed, work inside conspiracy

Compare that to the phony stats Washington feeds the press and public: Unemployment 5%, inflation 2% and long-term growth at 3%-4% (actually more like 1%). For example, just last week the L.A. Times reported that while "gasoline prices are up more than 20% from a year ago and food prices have risen 5%," Washington says "inflation was fairly mild last month." A Wells Fargo economist shook his head in disbelief: That report isn't "worth the paper it was printed on." Most economists are quiet, working for the conspiracy.

Scene 6: No integrity, they cannot be trusted to tell truth!

The same can be said of any government report, every speech made by today's leaders: All hype, lies and propaganda intended to deceive us. Treasury Secretary Henry Paulson's clearly playing the game: Remember what the former Goldman Sachs CEO told Fortune last July as our credit meltdown was metastasizing into a worldwide contagion: "This is far and away the strongest global economy I've seen in my business lifetime." He has no credibility. He knew the truth. He knew the government's "numbers racket;" after all, he helped create the problems years earlier at Goldman.

Scene 7: There's enough Kool-Aid for everyone to drink

The plot's unraveling: The lies accumulate and compound one on top of the another ... get passed on ... keep mounting ... forcing successive new generations of politicians to drink the same poisonous Kool-Aid ... keep the lies alive ... going strong ... till everyone believes the lies are really "the truth," or at least an inconvenient truth ... as the hoax becomes the conventional wisdom ... not only by Washington, Wall Street, Corporate America and the media, but also 300 million Main Street Americans.

Scene 8: Inflation statistics are America's new 'guillotine'

The biggest of all lies is with inflation. Understating inflation "hangs over our heads like a guillotine," says Phillips. Yet if Washington told us the truth "it would send interest rates climbing and thereby would endanger the viability of the massive buildup of public and private debt (from less than $11 trillion in 1987 to $49 trillion last year) that props up the American Economy." So we keep sipping the Kool-Aid.

Scene 9: Washington and Wall Street delusional in 'Land of Oz'

"Were mainstream interest rates to jump into the 7% to 9% range -- which could happen if inflation were to spur new concern -- both Washington and Wall Street could be walking on quicksand," warns Phillips. "The make-believe economy of the past two decades, with its asset bubbles, massive borrowing, and rampant data distortion, would be in serious jeopardy."

Scene 10: Cover-up failing ... king really has no clothes

Yet everyone still acts paralyzed, unable (or unwilling) to do anything to stop this lethal musical chairs charade ... till it's too late, or a catastrophe wakes us. Meanwhile, we act as if we had no choice but to put up with the crashes of 1987 and 2001 and 2007. Just "normal" bull/bear cycles. So like lemmings driven over a cliff, we'll blindly accept the next crashes, as each increase in frequency and intensity. Next in 2011? As war debt piles? As reforming health care, Social Security and Medicare are delayed? As we deny and deceive ourselves, perpetuate the lie ... except notice, out of the corner of your eye, at the edge of the screen, a curtain's being pulled open, slowly, our once-mighty statistical king, the Wizard of Washington really has no clothes on.

Scene 11: Millions of co-conspirators in massive cover-up

Still, we let ourselves be conned. Why? "The rising cost of pensions, benefits, and interest payments -- all indexed or related to inflation -- could join the cost of financial bailouts to overwhelm the federal budget," says Phillips. But it's a heads-we-lose-tails-we-can't-win bet. "As inflation and interest rates have been kept artificially suppressed, the United States has been indentured to its volatile financial sector, with its predilection for leverage and risky buccaneering" Yes, Wall Street and the rich love playing this game.

Scene 12: Rich get richer hiding under 'statistical camouflage'

So who really "profits from the low-growth U.S. economy hidden under statistical camouflage?" he asks rhetorically. Certainly not the masses: "Might it be Washington politicos and affluent elite, anxious to mislead voters, coddle the financial markets, and tamp down expensive cost-of-living increases for wages and pensions?" Yes, yes, yes, a voice screams off-camera! Then a gun shot rings out ... dull thud ... silence ... haunting music builds, filling the theater ... signaling the end of this tragi-comedy ... although like Sartre's "No Exit," you know this drama will never end ... until ... the next sequel ...

Roll credits: Who was that masked man?

Kudos to the masked curtain-puller. Yes folks, it's the same Kevin Phillips who wrote "American Theocracy, The Peril and Politics of Radical Religion, Oil, and Borrowed Money in the 21st Century;" "The Politics of Rich and Poor: Wealth and Electorate in the Reagan Aftermath;" "American Dynasty: Aristocracy, Fortune, and the Politics of Deceit in the House of Bush" and others. In his "Wealth and Democracy: A Political History of the American Rich," Phillips warned us that "most great nations, at the peak of their economic power, become arrogant and wage great world wars at great cost, wasting vast resources, taking on huge debt, and ultimately burning themselves out." Slowly, fade to black ....