When Wenlock and Mandeville, the official mascots of the London Olympic Games, were unveiled to the world in May, the general reaction was one of bemusement. These stumpy, one-eyed, metallic-skinned creatures, the organisers explained, had formed out of stray drops of molten steel during the construction of the Olympic stadium, but most of the public and media simply interpreted them as aliens. What do monocular extraterrestrials have to do with the Olympics? A year earlier, the 2012 Olympic logo was greeted with a similar mix of derision and puzzlement. Jaded observers passed off these designs as sorry reflections of the state of British creativity, but a small minority had a very different answer: we were being primed for the establishment of the New World Order, by means of the greatest hoax in history.

Even in conspiracy-theory terms, the London Olympics plot is a difficult one to swallow, but that hasn't stopped a credulous minority from gulping it down. You'll find them on cult conspiracy blogs such as Red Ice Creations, Godlike Productions and Above Top Secret, or even making their own video presentations on YouTube. The basic scenario goes something like this: while the world's eyes are on London in 2012, a spectacular alien invasion will take place at the Olympic stadium. Or so the public will think; it will actually be a hoax invasion, orchestrated by the New World Order as an excuse to stage a global coup d'etat. Terrified by the appearance of aliens, the world's populace will surrender their civil liberties, and "they" – a vague array of elite cliques such as the Bilderberg group, the Freemasons, the Illuminati, and dynasties such as the English royal family, the Rockefellers and the Rothschilds – will have smoothly achieved their goal of a single world government, economy and religion. It sounds like a cross between Dan Brown, the X-Files and Watchmen, but believers insist this stuff is real.

The evidence for such a plot is vague: exhibit A is the 2012 Olympic logo. Rearrange the four angular numerals of the bizarre design, the theorists say, and it really spells "zion". There's even a dot to go over the "i". This is a sign that "they" plan to build the new Jerusalem right here in England's green and pleasant land, just as William Blake's poem predicted. The "dark satanic mills" of the Lea Valley will become the epicentre of the New World Order. Conspiracy theorists insist there is nothing anti-semitic in their use of the word "zion", although the suspicion is there.

The next giveaway is the street names around the Olympic site: Great Eastern Road, Carpenter's Road, Angel Lane, Temple Mills Lane, Church Road – don't they all seem a little biblical? Isn't it strange that such a large patch of land has stood undeveloped in London all this time?

It goes on: Prince William is the obvious choice for king of this New Jerusalem because of his royal bloodline, his birthday (the 21 June – the summer solstice) and the fact that he will be 30 years old in 2012, the year of the 30th Olympiad, or XXX in roman numerals. Numerology counts for a lot in these circles. And as for the fake UFO invasion, the theorists note the closing ceremony of the 1984 Los Angeles Olympics, in which a flying saucer landed in the stadium and an alien walked out and waved to the crowd. The staged spectacle, in which a blacked-out military helicopter lowered a model spaceship by cable into the Coliseum, did not prompt mass panic, but it has been interpreted as a warm-up. The advocates of "London Zion", as the theory has become known, have been poring over London Olympics promotional videos and finding a lot of suspicious symbolism in them – flying saucers and other spaceship-like objects, lights in the skies, stadiums in flames, all-seeing eyes. Then Wenlock and Mandeville came along and the theory really had legs, albeit stumpy alien ones.

"Once your eyes are open to it, it's amazing what's hidden in plain sight," explains David (not his real name), the friend of a friend who first told me about the London plot a year ago. So in the name of curiosity, and, perhaps, the future of civilisation, we arranged to meet at the Olympics site to look for evidence. You can't get into the site itself – construction continues apace and security is tight – but there are daily guided tours of the perimeter. On a clear, chilly morning, as we wait outside Tesco for the tour to begin, David explains how most of the clouds in the sky are now man-made. Aeroplanes have been lacing the atmosphere with metal particulates for decades to facilitate holographic projection, he claims. That's how they'll pull off the UFO illusion. These "chemtrails" also enable the use of top-secret super-weapons that bounce energy off the upper atmosphere to remote locations. The Haiti earthquake was triggered this way.

David spends hours scouring the internet for conspiracy information, and stumbled on the Olympics plot theory two years ago on a blog called the Cosmic Mind, run by 28-year-old Rik Clay from Leeds. Clay was making a name for himself in these esoteric circles. As well as the Olympics, his blog discussed everything from the significance of the No 11 to crop circles to Princess Diana. But three months after the Cosmic Mind launched, it suddenly went down in August 2008. Clay had died. Internet forums were full of wild allegations about the cause of his death.

As the tour proceeds, David's eyebrows rise at certain points, such as when the guide explains how they had to reroute power lines crossing the site 30 metres underground. "There's bound to be a secret network of tunnels so that dignitaries can escape when it happens," David says. Had the guide ever seen anything paranormal going on here? "What, you mean like flying saucers? No, nothing like that," she laughs. David's eyebrows rise again. No one mentioned flying saucers. The vast construction site looks fairly innocuous to me. David isn't so sure. "What about that cross in the sky up there?" he says. Two short fragments of aeroplane contrail have formed a distinct cross in the sky directly over the stadium. That is good enough for him.

Unsurprisingly, the London Olympics organisers deny all knowledge of the conspiracy. "Since we launched the logo in 2007, many people have passed comment on it and have suggested it resembles different shapes or characters," a spokesperson says. "This is a new one on us. The logo represents the figure 2012, nothing else." The conspirary theory is far from cast-iron: you could make the word "zion" out of the numbers 2,0, 1 and 2 however you designed them. And while some of the road names around the site might sound biblical, the ones that don't, such as Pudding Mill Lane, have been conveniently omitted. "Of course it sounds ridiculous," David acknowledges. And then he delivers the killer blow: "But if I had said to you 10 years ago that a few people were going to destroy the Twin Towers by flying planes into them, and that Britain and the US would start two wars as a result, would that have sounded believable?"

Just as the assassination of JFK and Watergate fuelled a golden age of paranoia, so the attacks of 11 September 2001 and its repercussions have ushered in a new, productive generation of conspiracy theories. It's not just a fringe minority. In a 2006 poll by Scripps Howard/Ohio University, 36% of Americans agreed that the US government was either involved in the 9/11 attacks or did nothing to stop them. Another poll by Zogby in 2007 put the proportion at 26.4%. Then again, polls this year also found that 18% of Americans believe Barack Obama is a Muslim and 27% believe he was born outside the US. Public credulity seems to be at an all-time high, or reliable information at an all-time low. For the conspiracy hardcore, though, 9/11, the London 7/7 attacks and other terrorist incidents are what's known as "false flag" operations; hoax attacks designed to advance the conspirators' agenda, and the London Olympics plot is the next one.

Rik Clay's Olympics theory was chiefly inspired by another British researcher, Ian R Crane, whom he saw speaking at an event in Glastonbury in 2007. A former oil industry executive, Crane is something of a heavy hitter on the conspiracy circuit. He regularly holds public lectures and releases DVDs on what he calls "deep geopolitics", and claims to have predicted the BP Deepwater Horizon oil rig disaster, and pre-empted a failed terrorist attack in Chicago in 2006. It was Crane who first deciphered the "Zion" in the Olympic logo, and who suggested a fake UFO invasion was being planned. "We've seen the abilities of computer graphics in Hollywood movies," he says. "It doesn't take much to recast that fantasy as something that's then presented as a reality."

Crane also acknowledges that the Olympics conspiracy sounds crazy, but "it's only when one puts it into context with the much deeper geopolitical agenda that it starts to have some basis," he says. He sketches out this context in dizzying strokes. How the recent financial meltdown was deliberately planned, purported links between Obama adviser Zbigniew Brzezinski and extreme rightwing thinktanks, Henry Kissinger and global warming. "They're all inextricably linked," he says. "What we're really looking at here is a web of intrigue that actually goes back a long way. The individuals who believe themselves to be the rightful rulers of the planet have some concern about what the very short-term future holds. In their belief system, they feel they need to have total planetary control by 2012."

Crane and Clay exchanged emails, but never met. Crane doesn't think there was anything suspicious about Clay's death. Nor do others close to Clay, including his parents, who have been understandably distressed not just by the death of their son but by the subsequent internet rumours. "There have been many outlandish ideas put forward about Rik's death, some that beggar belief, but most have come from people ignorant of the real facts and who have been too lazy to do their research," says John Clay, Rik's father. "An autopsy was carried out and an inquest held at Bradford coroners court in February 2009. The official verdict was that Rik took his own life while the balance of his mind was disturbed." There were clear pointers to where Rik was heading, says John. A few weeks before his death, he had suffered some form of mental breakdown. He had jumped out of a third-floor window, fracturing his heel. His parents took him in for six weeks. "During his time with us he was not the Rik that we knew and was mostly very withdrawn," says John. "He told us that he had things in his head that shouldn't be there but would not elaborate, which was quite normal for Rik – he would only tell you what he wanted you to hear. Rik could be quite obsessional."

Another close friend of Rik's also believes his death was caused by a combination of his work and his mental health: "It's a stressful arena, conspiracy stuff. You can't trust anything any more. What level do you take it to? If you're passionate and paranoid, it can really take over, and I think that's what happened with Rik. He wanted to get to the bottom of everything. Unfortunately the result of that was that he pulled apart his own reality."

One of the problems with many conspiracy theories is that, unlike scientific theories, they're impossible to definitively prove wrong. Any attempt to do so invites accusations that you're in on them. Conversely, labelling something as a "conspiracy theory" is a convenient way to close down political debate or a challenge to authority by painting the theorists as wackos. Tony Blair described his critics as obsessed with conspiracy during the Chilcot inquiry earlier this year, just as George Bush in 2001 urged the UN not to tolerate "outrageous conspiracy theories" about the 9/11 attacks. Neutral observers point out that regardless of their content, conspiracy theories are "unofficial" knowledge, and therefore threaten institutions of official knowledge, such as academia and journalism. The two sides resemble each other more than they would like to admit.

The London Olympics theory is an intriguing case, not least because it actually makes a prediction. Either something will happen in 2012 or it won't: the theory will be right or wrong. What will people such as David do if nothing happens? "I'll be really bloody surprised," he says, "but if nothing happens, I'd say that the forces of good behind the scenes, like us, saved the day and the forces of evil were stopped."