One aspect of the "goy within" is that it perceives the world exactly as the gentile does - a material, physical existence. Unlike the G-dly soul, which perceives only G-dliness, the "goy within" perceives only material existence. In the words of the Alter Rebbe: "The animal soul comprehends the physicality of this world and its materiality...the intellect which is enclothed in physical matters [and] which grasps physicality in accordance with human intellect is a lie and truly the opposite from G-dly wisdom which is the wisdom of truth." That is the "goy" within.
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