"New Folder" starts with other folders nested inside

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I have an iMac with OSX 10.9.2. When I create a New Folder on the desktop, it creates a new empty folder. My sister just got a new iMac but on hers, when we create a "New Folder" (with any of the methods available to do so) it creates a new folder but inside are ALL the other folders on the desktop. And inside all those folders are ALL the folders on the desktop. Did some preference get turned on? I checked System Prefs and found nothing relevant. Any one know what's going on?
 
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I have an iMac with OSX 10.9.2. When I create a New Folder on the desktop, it creates a new empty folder. My sister just got a new iMac but on hers, when we create a "New Folder" (with any of the methods available to do so) it creates a new folder but inside are ALL the other folders on the desktop. And inside all those folders are ALL the folders on the desktop. Did some preference get turned on? I checked System Prefs and found nothing relevant. Any one know what's going on?

Whoa. That is bizarre. Just to be clear... using the Finder's menu command "New Folder", or using the key combo "SHIFT-COMMAND-N", or right-clicking and selecting "New Folder" is what results in this? Not using one of the "Smart Folder" options? If so, that's quite obviously a bug of some sort. I tried to Google for this and got nothing. Since this is new, I would just wipe the drive and reinstall OS X from scratch. Be sure to update it fully once done. Naturally, if she has any data on it that needs saving, she should back it up first.
 
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Thanks lifeisabeach. Yes, just the simple New Folder command, not the Smart Folder (which really shouldn't do that either). Very little is on the iMac yet and it's all on an ext. drive we used to get stuff from her former PC to this one. I'm not even sure how I would reinstall the OS these days since there are no Install DVDs any more and the iMac would need to be running to download a new version of OSX. It's such a new iMac that I may be able to get Apple to do it at the Genius Bar now that I suspect it is a bug.
Thanks.
 
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2019 iMac 27"; 2020 M1 MacBook Air; macOS up-to-date... always.
Thanks lifeisabeach. Yes, just the simple New Folder command, not the Smart Folder (which really shouldn't do that either). Very little is on the iMac yet and it's all on an ext. drive we used to get stuff from her former PC to this one. I'm not even sure how I would reinstall the OS these days since there are no Install DVDs any more and the iMac would need to be running to download a new version of OSX. It's such a new iMac that I may be able to get Apple to do it at the Genius Bar now that I suspect it is a bug.
Thanks.

Oh reinstalling is easy. I'll post a link to instructions, although if you guys really want to take the time to take it to the Genius Bar, I think they'd be mighty interested in seeing this themselves.
https://www.apple.com/osx/recovery/
 

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