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I was typing up a big, long, overly complicated message that only half made sense to me, then I found this: http://en.wikipedia.org/wiki/Etymology_of_the_word_Jew

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But no, Jude doesn't literally mean Jew. Jude is from Yehudah, from which Judah is also derived, which means 'praise; thanks'. How Jude/Judah came to refer to Jews is another story.

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However, the German word for Jew is Jude. In that sense, yes, it literally means Jew.