Why is it easier for the men of Lake-Town to believe in the dragon and more difficult for them to believe in Thorin and company in the middle of the wild
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The Master knows how dangerous Smaug really is. He also knows the prophecy. None-the-less, Thorin and the dwarves are celebrated and treated as heroes, and the Master...... knowing Smaug, doubts the dwarves are strong enough to be successful.