Okay, from what I remember, it's useless to convince a psychotic that their thinking is wrong. They are so entrenched in their beliefs that you have to get inside their head and work with them from that angle. For you, this is NOT a safe thing to do. You have already identified that this is triggering your own false beliefs, so I agree with those who said to watch out for yourself. I'm going to add FIRST. Because if you go off the wall, you won't be any good to your friend. So take care of yourself first.

Next, this guy needs to get a professional evaluation. Someone is going to have to get him to a psych unit for an eval on a 72 hour hold. What family does he have? Any connections to social services? As psychotic as this, he can't be working, can he? If he has some social service connection, that's who you tell. Your county health department might have someone who can give advice, altho it will probably be several phone calls and a day or two in the getting.

I wish I had something more definitive for you. Hang in there!