How does Odysseus's retelling of his wanderings to Penelope in book 23 function in The Odyssey?

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Odysseus's recounting of his story of his wanderings to Penelope in book 23, the second to last chapter, functions to bring closure to his travels and start winding the book down to its conclusion.

But before Odysseus can get to the point of reuniting with Penelope as her husband, he first has to overcome the obstacle of her disbelief that he is who he says he is. She believes he is a god disguising himself as Odysseus. Given the tendency of the Greek gods to use deceit to obtain sexual access to mortal women, Penelope is wise to be cautious. She also has had many men attempting to marry her over the years.

Even when he appears in fine clothing, Penelope is not sure Odysseus is who he says he is. She tests him by suggesting that they move their wedding bed to a new location. This incenses Odysseus, who knows that the bed is built from a tree that is firmly rooted in the ground and can't be carried from place to place. After he reveals this information in a long speech, Penelope throws herself into his arms.

To help reestablish the intimacy of their marriage, the two share with each other what has gone in their lives for the past decade. Odysseus tells Penelope all that has happened to him. Athena actually has to delay dawn from appearing so that the two can get caught up with each other.

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Book 23 of The Odyssey begins in the aftermath of Odysseus's slaughter of the Suitors and details Odysseus's reunion and reconciliation with his wife, Penelope. Of course, it should be noted that Penelope herself is mistrustful of Odysseus and wary that his return amounts to a deception. (And here it must be said that these kinds of deceptions are a recurring theme throughout Greek mythology. When seen within that context, her misgivings are actually entirely valid, and her skepticism displays a shrewdness well-matched with Odysseus himself.) Thus, rather than accepting her husband's return on faith, she instead tests his identity to confirm to her own satisfaction that he is actually the person he claims to be. Even if Odysseus had already returned to Ithaca (and slain the Suitors), it is only after he has passed her test that his marriage to Penelope can be restored.

Towards the end of book 23, then, we observe Odysseus and Penelope recounting their experiences to one another. I do think that there might be an element of emotional catharsis here. At the same time, though, it feels like a point where the entire poem has come full-circle, where those previous threads can be revisited and re-invoked, now that much of the poem's emotional impetus has been resolved.

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Odysseus’s retelling of his wandering in book 23 must be seen within the context of the book and the epic poem as a whole. When we do this, we realize something about Penelope’s character: she is smart, knows how to scheme when she has to (think of the burial shroud that she made for four years), and is clever in every sense of the world. She is just like Odysseus, a match made in heaven. So, when there is a man who looks like Odysseus, she must test him. She needs to be persuaded.

In the book, Telemachus is shocked at her mother’s lack of initial warmth towards Odysseus. Penelope is being cautious. Hence, Odysseus's retelling is necessary. He needs to make his case; he needs to persuade Penelope, and he knows it.

The final test, of course, is when Penelope says to her maid servant to move the bed. Both know that it cannot be moved. If Odysseus is the man who he says he is, then he will know as well. He does. Only after passing this test does Penelope believe that this man before her is her husband. In conclusion, the retelling of Odysseus’s story is just a part of a larger test. Both he and she would have it no other way.

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Book Twenty-Three is the penultimate book of the Odyssey. Odysseus has survived his many trials and made it home to Ithaca, killed the suitors who had taken over his household, and been reunited with his family. His reunion with Penelope is the final step he must take to complete his homecoming. Odysseus conceals his identity from his wife until after dispatching the suitors, which enables him to return to Penelope's arms as the undisputed lord and master of his household.

Penelope is overjoyed to welcome Odysseus home, and is eager to know what has happened to him in their long separation from each other. Odysseus recounts his experiences to her as they lie in bed together for the first time in twenty years:

Odysseus told
of what hard blows he had dealt out to others
and of what blows he had taken—all that story.
She could not close her eyes till all was told.

A lot of things have happened during their time apart from each other. Odysseus takes action to undo the situation that has arisen in his absence, for he cannot truly return home while the suitors remain in situ. Penelope, for her part, needs to be able to "fill in the blank" of the past ten years. It is essential to Penelope to understand where her husband has been and what he has been through since the end of the Trojan War. They cannot move on with their life together until Penelope is privy to Odysseus's experiences.

For Homer's audience, this passage also serves as a "recap" of the events of the poem, signalling that the action is over now and the hero will rest from his adventures.

[Odysseus] drowsed over the story’s end. Sweet sleep
relaxed his limbs and his care-burdened breast.

Although Odysseus must fulfil one further obligation to discharge Poseidon's wrath, and although there is a temporary threat of violence in Book Twenty-Four, the main story of the Odyssey concludes with Book Twenty-Three, as Odysseus retells his story to his loving wife and then falls asleep in her arms.

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