Everything is prepared for the Lenten carnival. A herald announces its start, pointing out the differences between this affair, which will be in the Italian mode, and the typical Germanic festival.
The next morning the Emperor and his courtiers gather. Faust and Mephisto are among them. The previous impression of decadence is reinforced in the conversations which now take place. It is revealed that the Emperor, with hardly any conception of the significance of his act, has accepted the advice about paper money based on the potential underground resources of his kingdom. The country has been flooded with the new currency and everyone is pleased by what appears to be prosperity.
The herald's contrast alludes to the differences between the Gothic first part and the Classical second part of Faust.
A pageant now takes place in which many allegorical figures representing the different degrees of worldliness and many aspects of human experience appear. Faust is among them, disguised as the god of wealth. He demonstrates his magical skill to the Emperor and convinces him of the soundness of Mephisto's new financial scheme. The Emperor gives him permission to implement it.
Most of the figures in the pageant are drawn from Greek mythology, signifying the emphasis on Classical thought that will be maintained throughout much of Part Two. There is also a suggestion, from the predominance of artists and poets, that there is a close connection between the evolution of art and the evolution of the human spirit. The Boy-Charioteer who drives Faust is the personified spirit of poetry — a selfless source of beauty and inspiration — and seems to mirror one side of Faust's personality. The main sources of imagery in this scene — fire and gold — refer to the dangerous elements within and beneath society. Neither of them is basically bad, but both can be misused to the detriment of mankind. This scene has been read by some scholars as an allegory of the French Revolution, but its full meaning is looser and more generalized. It warns that society can be destroyed by the very things that also ensure its existence.