Read it for the first time just now - it seems to me that Pierrot has stolen the narrator's purse (under the guise of dusting the chalk from their cloak) and successfully convinced them to blame Truth, instead. There's almost certainly more to it that I'm missing.

The thief is Pierrot.

The people around are telling the storyteller that "he" (Pierrot) has stolen the purse, but the storyteller misinterprets this as pointing to some arbitrary agent.

Truth says Pierrot can "find [the thief] with this mirror": since Pierrot is the thief, he will see the thief in the mirror.

Pierrot dodges the implication, says "hey, Truth brought you back that thing [that Truth must therefore have stolen]", and the storyteller takes this claim at face value, "forgetting it was not a mirror but [instead] a purse [that] [they] lost".

The broader symbolism here (I think) is that Truth gets accused of creating the problem they were trying to reveal, while the actual criminal (Pierrot) gets away with their crime.

The narrator's "friend" pickpocketed him. When boldly confronted by Truth, he cleverly twists her accusation to make it seem like she's confessing, and the narrator, bewildered by the laughter and manipulation, buys it wholesale. Bonus points for connecting it to broader themes like mass propaganda, commedia dell'arte, or the dreamlike setting and hypnotic repetition of phrasing.

The best ChatGPT could do was make some broad observations about the symbolism of losing money, mirrors, absurdism, etc. But it whiffed on the whole "turning the tables on Truth" thing. (Gemini did get it, but with a prompt that basically asked "What really happened in this story?"; can't find the original response as it's aged out of the history)