I'm perfectly content in concluding that Sarah Palin is simply an ignorant person and probably tends to surround herself with ignorant people. While I certainly wouldn't blame Jewish people for being offended by the incorrect usage of such a term, I don't see it as racially offensive. Like everything else she does, it's intellectually offensive simply because someone that ignorant is given a microphone and is paid attention to. She may occasionally be guilty of malice, but first and foremost she's ignorant.
What purpose aside from looking stupid does the knowingly incorrect use of blood libel serve? Attention? She's already got that in spades.
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