SS2 Vegeto

Madara has made indirect admission at an earlier point that his power was not "as it should be", as well.

Itachi may have been deceiving Sasuke, but he had no reason to lie about the power. He could have just as easily said he was weaker, and that he needed the power to surpass current Madara. There's no reason to lie about it.

As for old Sandaime being stronger than Itachi, no. Orochimaru without any summons could hold his own when directly attacked by Sandaime with Enma, and even disarmed him and immobilized Enma. Even then, in a stronger host body, Orochimaru considered Itachi completely above and beyond him, so that there was simply no possibility of success in confronting him. Sandaime at that age, in his weakness, being stronger than Itachi is utterly and entirely impossible. The answer, whatever it is, lies elsewhere. There's really no right or wrong answer to this at the moment, but thinking about it, there are some possibilities. For one, the revived bodies of Nidaime and Shodai reformed completely no matter what damage they took. Damage didn't matter as removing their souls was the only way to beat them, and they focused mainly on the offensive. In addition, Sandaime overestimated his own abilities, having been out of action for a long time. Another possibility is that being mindless killing machines worked against them. It removed their inhibition, but made them almost robotic, and therefore Sandaime was able to beat them in the way that he did. Orochimaru was made various hand signs immediately before Shodai and Nidaime started to battle, so there's the possibility that he at least partially controlled them, and that they were weaker because of this. Last, we shouldn't ignored that Sandaime was getting beaten pretty badly until he sacrificed his life to seal them, and Orochimaru's arms after.

Here's where it gets the most confusing, though. Sandaime was said to be stronger than his predecessors in his prime. Yondaime was said to be the greatest Hokage Konoha had ever seen, someone to which everyone else pales by comparison. Yondaime couldn't beat the Kyuubi by normal means. He sacrificed his life to imprison the demon fox in his son. Madara controlled the Kyuubi, when he battled Shodai. Sandaime in his prime was stronger than Shodai, Yondaime was stronger than Sandaime in his prime, the Kyuubi was stronger than Yondaime, and Madara "tamed the Kyuubi and controlled it like a pet". Shodai beat Madara in his prime.

However, seeing as Madara had actually summoned the Kyuubi during their fight, it would be ridiculous to think that Shodai had the ability to supress it/bend it to his will and ignored it. It'd be like being in a fight and deciding to attack only with your butt. Added to that, is the statement that those abilities are what allowed Shodai to become Hokage. However...even if he not only neutralized Madara's advantage with the Kyuubi but turned it against him, they were both injured before that. The only way I can possibly think to try and patch this up is if Madara was injured before he summoned the Kyuubi...but even so, Madara had the Eternal Mangekyo Sharingan and space-time ninjutsu greater than Yondaime's. It's hard to envision how the differences in power work. I mean, it's a start so far, but I really, really hope the manga offers more clarity in the future.

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