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This section, entitled "Harry Haller's Records" is told by Haller from the first person point of view. He admits that his life resembles the lonely existence of a beast of prey who has revolted against modern bourgeois culture, even though he accepts its comforts.
He begins his story with an uneventful day that has neither great pleasure nor deep pain. He is troubled by this equilibrium and contentment, which he feels is symbolic of the mediocrity of the middle-classes. He longs for any strong emotion.
Haller, who calls himself Steppenwolf, decides to go out to a tavern. As he walks in the town, he spies a sturdy old stone wall that has been defaced by a neon sign. He strains to read the words, which say "Magical Theater. Entrance Not for Everybody." As he wonders who goes in to the theater, the sign changes and gives him an answer: "For Madmen Only." It is not surprising that the Steppenwolf in Haller wants to go inside, for there is something "mad" about that part of himself.; but Haller travels on towards the tavern, which is solid and permanent, not changing like the neon light. When he finally locates it and sits inside, he thinks how the place has been the same for twenty-five years; it still makes him think of paintings and literature. Feeling like an outsider, as always, Steppenwolf wonders whether any of the other people in the tavern are like him. Both Haller and the reader know the answer is negative.
Hesse and Haller's fascination with music clearly emerge in Part 2. He thinks back on the wonderful classical concerts he has attended and is filled with the music of Bach and Haydn. When he emerges from the tavern and hears the jazz, with its mixture of sentimental blues and vigorous syncopated rhythms, he despairingly calls it "the music of decline;" to Haller, it is a symbol of the societal decadence to be found everywhere around him. He contrasts modern, makeshift culture to the real culture of the classical period, filled with spirit and soul. Haller bemoans the fact that things of beauty and sincerity now seem to be dead.
When Haller passes by the sturdy stone wall again, it has changed, becoming the first of Steppenwolf's many illusions. No longer is the neon light present; neither is there an arched entry in the wall. The change in the sturdy structure, which seemed to be so solid and permanent, makes Haller question if anything in modern life can be trusted. What was present an hour before is now vanished, and he wonders if he is perhaps mad.
Haller's story, however, is the record of an unusual process of critical self-examination in which he must cast aside ordinary forms of reason, appearing like a madman. Certainly to his contemporary society, Steppenwolf, with his odd behavior, schedule, and mannerisms, did seem abnormal and crazy. To Hesse, however, Haller's strangeness was not madness but a golden thread of creative genius.