Somebody wasn't paying attention. Here is the deal. Bilbo is, strangely enough, a Hobbit. Bilbo wrote The Hobbit for other hobbits. You've got to keep this in mind when you look at everything in The Hobbit. The folk back in the shire don't really care if giants actually exist, just the same as how people in the real world aren't concerned with the fictionality of hobbits. That being, the authors (Messrs Baggins and Tolkien) can inject certain aspects of fantasy into their respective stories. The fictional story that Bilbo wrote (though it may mostly be based on his experiences) holds no bearing on the reality that he lived in, just as Tolkien's story holds no bearing on his reality.
<font size=1 color=339966>[ 6:18 PM February 05, 2004: Message edited by: burrahobbit ]