Johah Goldberg is right about how paranoids think. Paranoia is a more "advanced" form of a psychological defense known as "projection". I have discussed this elsewhere, but it bears repeating since it is so common.
Projection is attributing one's own unacknowledged feelings to others; includes severe prejudice, severe jealousy, hypervigilance to external danger, and "injustice collecting". EXAMPLE, EXAMPLE, EXAMPLE, EXAMPLE, EXAMPLE . Most young children use projection as a defense mechanism, and it is considered normal for a child.
Projection is never a good long-term strategy--nor is it healthy--in an adult; and using such a defense mechanism represents a primitive attempt to shirk the responsibility for one's own feelings, thoughts, and actions. It causes and has caused much human misery, death, destruction and some of the most horrific acts that humans are capable of. When entire countries subscribe to a projected delusion (e.g., the "Jews" are to blame; the "Blacks" are the cause of all of our problems; "Republicans" are evil) it can lead to genocide and other behaviors that are paranoid and psychotically delusional. Full-blown paranoia occurs when one's mind severs the connection with reality entirely. Paranoia is a symptom of mental illness.