You'll remember back to the time of the glorious Preface to Book 1, when Ishamael and LTT got to talking. Ishamael was so kind as to lift the taint and madness from our great hero's eyes. At seeing the destruction he had caused, he went out in a glorious blaze. Unfortunately for Ishamael, LTT was sane at the time of his demise and so should be to this day. I put forth the notion that Lews Therin is in fact perfectly sane sitting up in Rand's head, but simply seems mad because of his guilt and depression.
Raserei says: Perhaps, but who's to say on whether the lifitng of the taint by Ishamael was permanent, and not some momentary enlightenment?
But, like you said, LTT might have slipped into a different madness, one he brought on from his seeing what he did. So, he tumbled into a maddening loss and unbearable weight of thousands of lives lost because of him...sounds like thats what Rand is slowly becoming.
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There's no doubt that LTT is mad. Half a page of listening to him talk in Rand's head will tell you that. I don't think that it's just grief over Ilyena, either, because at the end of the prologue he was sane enough for a few moments, *with* the knowledge of Ilyena's death. Suicidal, true, but coherently so. I think probably Ishamael's rough Healing only gave LTT a moment of sanity, enough to realize what he had done, but didn't clear the madness altogether. I don't think Healing CAN completely cure madness, anyway. Somewhere I'm fairly sure that it's been said it's not possible. Besides that, even if LTT was cured of his original madness, there's nothing to say the taint hasn't caught up with him again - through Rand - and brought him back to madness from whatever sanity he was beginning to regain.
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LTT is dead! We know that death removes insanity (unless birth does) because Rand started off sane. If Rand/LTT is a hero of the horn then LTT is definitely not mad since the Artur Paendrag treats Rand (whom he recognizes as LTT) as if he were sane. In other words, while in T'A'R LTT was sane. (The way that Artur and company treats Rand indicates, IMHO, that the dragon is a prominent member of the heroes of the horn.)
If LTT was sane while waiting in T'A'R then why is he insane now? Why does LTT exist at all? Rand and LTT are the same soul. A useful analogy is to imagine that a middle aged man suddenly got the memories, mannerisms, and voice in his head of himself when he was a teenager. Even if it were possible for the spirits of others (and of the dead) to enter someones head, we would still say that man was crazy. (You can't possess yourself!)
LTT isn't crazy. Rand is.
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...before he died on at Kinslayers Dagger. Ish heals him with 'Shaitains Healing' (bringing the dark cloud over him and not feeling like anyting LTT had felt thru Healing before) and he's sane enough to know whats going and where he is in the palace.
But then it says "Desperately he reached out to the True Source, to tainted saidin, and he Traveled.", when leaving the palace.
So either he
Was Healed enough to fight off saidin temp, or he
Was Healed and then made himself insane again, or in the beginnings of, when he used the power to travel.
Doesn't one of the chosen say something about being under the DO's protection later, in regards to using saidin?
We have to remeber that Lews Therin is bound to Wheel and remains in the world of dreams between lives and as such has a complete knowledge of what he was and did in the previous life. I don't think he would be mad from the taint because then he probably would have used the power in the world of Dreams, however living with killing your entire family for three thousand years just might push you over the brink.
What bugs me isn't the question about LTT being mad (in my opinion what Ishamael did was, of course, only temporal; meaning it was only the "clearing" of LTT's mind. Nothing was done to the taint), but the fact Rand thinks he (=LTT)is, and doesn't suggest anything else when thinking by himself. It's always: "ah, the Mad LTT again." To me it seems RJ wants the readers to think LTT is mad, or then he's just highlighting Rand's lack of views.
However, everyone else in the WoT series also seems to share Rands way of thinking "without the possibility of other options". Such as: the red ajah captured Rand, and wanted to keep him secured so he could be ready for Tarmon Gaidon. Now really, how did they think he was gonna fight the DO? If they were able to capture him rather easily themselves (15 against 1 yeah, but still "rather" easily)? It "seems" they're just blindly trusting the prophecies of the Dragon. No one's even questioning his chances and that means they must think he's got something no one else does. But why doesn't anyone ever talk about THAT thing! (I hope this isn't too confusing)
Back to LTT: Rand thinks the LTT in his mind is mad. Rand's opinion about this fact seems to be TOO clear; and from that I get the itch that RJ wants him to think so. And Rand is not the kinda person to make philosophy so...
Jazz Necesse Est 
Knowing you brutally murdered everybody you loved and who loved you would be enoughto drive ANYBODY insane, and having to *live* so to speak with that fact for 3,000 years would CERTAINLY do it! If it didn't you'd have to be more wvil then the most evil person/enitiy to ever exisist. One way or another LTT is most definately insane.
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Remember, Rand is still channeling saidin and Lews Therin has before as well (i.e. small contacts like breaking the shield, if that used saidin...I am not too sure if he has ever actually grasped saidin before). Lews Therin is still in contact with the taint. I wonder if Rand channeling subjects LTT to the taint? In my opinion it does, and that is helping to produce his madness - also produced from him killing his kin. Complete conjecture, but never know.
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First off I do not think ishamael has the power to lift the taint from someone forever, he may have for a few moments, but definatley not forever. Secondly, Lews Therin Telamon is always saying weird things like "i killed the whole world, and if you try real hard you can to." that hardly sounds like something a sane man would say.
Whatever you think of LTT's sanity, its not the SAME madness as at the start of tEoTW. Ishy's healing must still have some effect or he'd be laughing happily and expecting Ilyena to appear and greet his guests (etc) any moment. In Rand's head, he is weeping and wailing over what he's done. Given that removal of madness was specifically what made him realise that he'd killed her, it seems logical that he is still 'sane' in Rand's head.
I would conlude that he is sane, but with the weight of what he has done on his mind. Also, v good point in earlier comment, that its only ever Rand's opinion that LTT sounds insane. RJ has said, one of the themes of the books is that each person knows only a small portion of the whole story, and that their PoV's are affected by this. Obviously Rand assumes LTT is insane, because he knows a bit of history! Perhaps if he didn't he wouldn't dismiss him as mad so easily
It's like that old saying: A conservative is a liberal who's been attacked by aliens
I wonder how much power, tainted, nasty saidin, it took to make the Dragonmount? Even if he was sane, he drew enough power at his death to create a small mountain range.
But he was not sane. Here is the quote that many have eluded to.
Tossing back his black cloak, Elan Morin flexed his hands. "A pity for you,"he mused, "that one of your Sisters is not here. I was never very skilled at Healing, and I follow a different path now. But even one of them could only give you a few lucid minutes, if you did not destroy her first. What I can do will serve as well, for my purposes."...
EotW prologue, pg xi(paperback)
ok yets think of it this way. Ltt maddnes has change from what he was like just before he killed himself. what if ishy didn't make him totally sane (if it is even possible). what if he just changed the type of maddess, leaving ltts as semi insane
Does it matter if Lews Therin was mad when he died or not? Once he's in TAR waiting to be spun back into the wheel, like Birgitte was, it seems he would go back to his
original form(mind and body), not the one that he died in in his most recent life.
I think he if he went back to TAR he would be sane again, i dont think your soul can become insane, i think its a state of the mind, as it can be healed at least temporarily. Also we dont know that anything LTT has said is neccessarily crazy... what if the people that LTT always wants to kill actually turn out to betray rand....This would make sense especially you are of the camp that Taim is one of the forsaken. To quote shakespeare: "There is a method to his madness." LTT might have access and insight to the people he wants to kill that RAnd and others do not... He's just so guilty over Ileyna and the rest of his family that he hasn't bothered to share all the information yet.... I might be wrong about this as well, but didn't LTT want to kill some of ashman that betrayed him? He must know something.
is the creator.
"I have always been myself, even when I was ill. Now, however, I seem myself. I have remembered how to seem."
-King George III, The Madness of King George
If your soul goes back to TAR, you would loose the madness and the guilt of what happened in your past life. Look at Birgite. She never batted an eye about things done in her past lives. They just were; things done in one of her lives. Ergo, if LTT went back to TAR he would not be insanely guilty over the death of his loved ones - it would just be something that happened in one of his lives where the DO got the upper hand. He would not be begging for death, because death would have already freed him of his guilt.
He's had 3000 years of guilt to think about what went wrong and what has to be done to fix it... and I agree, he does know something and if Rand would get over the thought that LTT is insane and accept that LTT's just guilty, working together they could really do amazing things.
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I'll keep this short. Ishy cured LTT insanity. Then the first thing LTT was travel to the site of present day Dragonmount and channel more of Saidin than any man could channel unaided, which drove him mad again.
If LTT was sane while waiting in T'A'R then why is he insane now? Why does LTT exist at all? Rand and LTT are the same soul. A useful analogy is to imagine that a middle aged man suddenly got the memories, mannerisms, and voice in his head of himself when he was a teenager. Even if it were possible for the spirits of others (and of the dead) to enter someones head, we would still say that man was crazy. (You can't possess yourself!)Yes... Why does he exist? Should he be there? Does balefire destroy the soul (obviously not...)? Why do a lot of things happen? Well, because it's a book... Or in this case 12-15 books... wheeloftimefan
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surely finding out you'd killed everyone dear to you would be enough to send you mad all over again, even without the taint... right?
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This is how I always percieved LTs maddness.*NM*