Man, what a loon. The government isn't watching you. They've got better things to do with their time like... Govern stuff. Same goes with mind control. OooOOoOoooh, power of free will basically craps all over that. He's crazy. But crazy is just the stuff humour is made out of, so read some of this comedy gold. Crazy people are so funny.
Unfortunatly, most of the time, it's guilty until proven innocent. Honestly, it is.
On the same page though: That sort of thinking is usually linked to a psychological inbalance caused by some sort of inproper significance to certain feelings that were inplanted at an early age. He probably has a huge problem conveying any rationalities towards such things as love, trust, etc... There is two things you can do, and either one will be just as in-effective:
Ignore it, stop talking to him about it as that is just fuel for the fire.
Get him help.
If I were you, I'd tried to find a more balanced living situation.
thinking is like pong, it's easy, but you miss sometimes.
This thread is full of dangerous advice. Not bad, but dangerous.
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Disclaimer: Any sarcasm in my posts will not be mentioned as that would ruin the purpose. It is assumed that the reader is intelligent enough to tell the difference between what is sarcasm and what is not.
It could be a number of conditions the guy has, from simple paranoia to the more paranoid schizophrenia. I've worked with such people and the best way to deal with this is to simply let him believe what he wants to believe. You're not a psychologist, just a friend, and telling him he's crazy could well make him do and say more reckless things. Maybe ask him to show you the information that he uncovered.
It also depends on how much you want to get involved, because it can be far too easy to get drawn into a situation like this. Despite the fact that his beliefs are out of sync with reality, they are still his beliefs. If you don't want to get too involved I would do either one of two things - go along with what he tells you but perhaps try and gradually pick apart his reasoning - don't do it all at once otherwise his world will crash around him and he won't know what's real and what's not. Maybe focus on one small part of his delusion. The other thing you could do is to either move out or contact a psycologist with your concerns, but they may well say that he needs to turn up of his own free will.