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But at least the powercreep is much better handled here than in most manga's, I get the impression that one wrong step and most of the overpowered characters would go splat.
Likewise. All the vastly powerful characters have very different powers and weaknesses. How many times in the series has someone said something like "I'm the
worst possible opponent for you" "That'd work on most ninja, but not me" or even the damned smug "all you techniques are useless before my eyes."
Hell, even back in the Wave Arc, Zabuza realized that the Sharingan needed to make eye contact or at least see the opponent to be if much use. Good thing for him he was an expert at sneaking around in a fogbank and killing people. If Kakashi hadn't had a hidden skill (ninja dogs) to fall back on, he would have been easily killed.
The Fourth Hokage seemed the king of speed freaks, and if that were all, A could've taken him. But he increased his mobility further with throwing knives he could teleport to. Yet I have to wonder how he would've fared against the first Three Hokages who, going from their appearance early on, were not shy about spamming wide-area smackdown techniques and in theory could do a lot to constrain him.
Or Obito, who's effectively invincible unless the opponent has detailed knowledge of his limitations and a lot of prep time (Konan) or his other eye (Kakashi.)
All the high-level ninja seem to have their own game of rock-paper-scissors going on, with strengths and weaknesses and personalities rather than elements. And with the added element of understanding. Like Obito pointed out, the Konoha ninja have seen Pain fight, described his techniques, and they've doubtlessly developed plans for dealing with them.
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I think part of the problem is that powercreep entered the series slightly before the mangaka fully figured out his own mythology so we get the situation where the Third, even with the reasoning that he's much older and no longer in his prime; is claimed to be stronger than the First(?) doesn't look like it considering abilities and power of characters around right now.
Journey to the West again. After watching the Third Hokage fight it became pretty clear that he's supposed to be an expy of
Sun Wukong, which raised my estimate of his threat level a lot higher than hearing he'd been un-ironically called "the God of Ninja."
In rather sharp contrast, Tsunade hasn't done anything remotely badass or Hoakge-like since her introduction arc. I'm afraid I'm going to have to side with Madara on this one.