Inside Dale.
Gandalf shook his head sloy. "If Smaug had ruled here for ten years, Bilbo, the answer to your question would be easy. But it has only been half a year. We don't know if this is a dragon's whim or a dragon's nature."
Bilbo nodded. A dragon who is good for six months might just be a dragon waiting for a larger feast. But if this prosperity lasted a decade... then Thorin's reclamation would be nothing more than a crime against the people.
"Let's visit the Manor," Gandalf said, leading the way to the city's highest point.
Bard received them at the gates. He saw the concern in the Wizard's eyes and decided to be blunt. He laid out the full scale of Smaug's strength: the Elven alliance, the Goblin legions in the deeps, the presence of Beorn, and the seven Stone Giants standing sentinel on the slopes.
"Do you truly believe an army of Dwarves can take this mountain now?" Bard asked.
Gandalf remained calm, but Bilbo felt his heart sink into his furry toes. The Hobbit hadn't heard about the Goblins or the alliance. He looked at Gandalf, realizing for the first time how much the Wizard had been keeping from him.
"I'll explain later, Bilbo," Gandalf said with a strained smile.
As evening fell, Gandalf slipped out of the city and trekked to the house of Beorn. The large man was busy preparing dinner—a new habit he had picked up since moving to the valley.
"I am Gandalf the Grey," the Wizard introduced himself with a bow. "I seek news of the North, if you are willing."
Beorn didn't stop stirring his pot. "I'm making dinner. Don't let it burn."
Inside the kitchen, the conversation was swift. "Why did you come here, Beorn? How did a dragon convince a man who hates everyone to move his house?"
"He promised me the head of Azog the Defiler," Beorn replied simply.
Gandalf knew the depth of the blood-feud between the skin-changers and the Pale Orc. The motivation was absolute. "I see."
"I've heard the prophecies," Beorn continued, looking Gandalf in the eye. "They are wrong. The Dwarves will not take back this mountain. I lived here when they ruled. They brought greed and stone-dust. Smaug brings seeds and safety. Tell me, Wizard... who should I support?"
Gandalf had no answer.
By the time Gandalf reached the Great Gate of Erebor, the sun had set.
Gollum was crouched in the shadows of the entrance, his eyes glowing like twin moons. "Gollum! Gollum! The thief-wizard comes to the door! Does he want to steal our Precious? Does he?"
"I am no thief, Gollum," Gandalf said patiently. "I wish to speak with Smaug. He knows me."
"We don't trustses him! He talks like a friend but thinks like a burglar!" Gollum hissed, arguing with his "Precious" about whether to let the Wizard in.
The impasse was broken by a voice that rumbled from the very foundations of the mountain. "Gollum... bring him down."
Gollum's demeanor shifted instantly. "The Master says yes! Follow us, sneaky wizard!"
As they descended the vast stone stairs, Gollum cackled over his shoulder. "I told the Master you is coming to steal! He's going to eat you, yes he is!"
Gandalf rounded the final corner into the golden chamber. He expected to see the Fire-drake atop his hoard.
Instead, he saw Alice.
The Wizard froze. His pipe nearly fell from his lips. His mind went numb with a shock so profound it felt like a physical blow. Impossible. Dragons do not appear from thin air. Not now. Not like this.
"Smaug..." Gandalf whispered, his voice cracking. "What... what is this?"
Smaug lifted his massive head, a smug, toothy grin spreading across his snout. "Welcome to my palace, Gandalf. Meet Alice."
Alice, sensing the powerful aura of the Wizard, let out a sharp, protective chirp.
"Easy, Alice," Smaug rumbled. "He's a 'friend' of sorts."
Gandalf stumbled forward, his boots crunching on the gold. "She is a hatchling... she hasn't been out of the egg for more than a day. You found a nest? You found a mate?!"
"I found an egg," Smaug said casually. "I didn't tell you in Rivendell because I wanted it to be a surprise. Do you like it?"
Surprise? Gandalf thought wildly. This is a nightmare. A second dragon meant the end of the status quo for the next thousand years.
"Look at this land, Gandalf," Smaug continued, his voice echoing through the chamber. "Look at the crops, the spices, the lives of the people in Dale. I am teaching them how to live, not just how to survive. In ten years, the North will be the wealthiest and most advanced region in Middle-earth."
"Can Thorin do that? He'd spend the next decade counting his coins and building walls. Can the Elves do that? They'd spend it singing songs about the past while the people starve."
"I can do it, Gandalf. I am doing it. So tell me... why should I give this mountain to a man who only knows how to dig holes and hold grudges?"
Gandalf stood in the center of the hoard, surrounded by more gold than he could count, and for the first time in his long life, he felt the heavy, crushing weight of being on the wrong side of history.