Ernie heads to his home town and gets flashes of his past. He finds his parents graves and revives them. taking them home he orders them to reveal things from his past.
He takes them right back before they were bad to him. He sees that they were worried by his psychic powers and thought it might be a case of demonic possession. What he draws comes to pass, the Priest they ask fails to agree. Later we see that Ernie is a lonely boy and he befriends a mouse he names Smiley, much to buttons annoyance.
Going back further his parents feel bless by their boy and decide to try for another. On the day they discover their are to have another child they lose the the last account that is keeping the family mill business open. The news breaks his father who becomes like his own father and hits Ernie. When Smiley falls out of a cupboard his dad kills him and goes and gets drunk. Unhappy Ernie draws pictures of his parents car crashing. His mother is driving at the time and crashes and looses the baby. This was the incident that broke them both permanently.
Ernie's rage and disgust tear him physically and emotionally and as is dead self hits the floor a living self is born and a young version of himself becomes a separate entity.