I think the whole solution to this story revolves on that.
Bilbo's story of
There and Back Again was obviously true, as no-one in his right mind would write the word "grocer" on an autobiography (if I have to, I'll use the phrase "commodities trader"), not even Mad Baggins in his right mind.
OK, that's a metaphysical dislocation there. Mad Baggins is not in his right mind. How do you resolve this?
Mad Baggins
is in his right mind. He's mad.
Anywhen, Frodo's crystal might be some sort of hallucinogen, marketed by the Elves so they could subjugate the lowly Men once more. Mwahahahaha!!!
Oh, no. Now he's mad.
Wait, how about Bill Ferny.
Bill Ferny is an Elvish propaganda, an allegory for all Mankind. We are gonna have a pony kick y'all in your Shires! MWAHAHAHAHAHAHAHAHA!!!!!
Forgive him. He's mad that way.
MWAHAHAHAHAHAHAHAHA!!!!!