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My grandmother from Georgia openly refers to herself and other white southerners as "Crackers", and sometimes adds a state as in "Georgia Cracker" or "Florida Cracker". She says it means simple folks who can only afford to eat crackers. I've also heard it refers to a cattle rancher who likes to crack their whip... but of course it invokes the image of a slave-master.

How broadly is this potentially pejorative expression used? Does anyone know where it really came form, or how disparaging it is?

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It sounds like it should be disparaging, but really doesn't feel that way, even when said in anger. –  Mitch May 24 '13 at 1:38
    
First time I've heard this .. in Australia it means something was good or a fun time. That house party last night was a cracker! –  wim May 24 '13 at 3:39
    
Unlikely this is a term of disparagement. The Atlanta Crackers was a minor league baseball team in the AA League until 1965 when the Milwaukee Braves moved to Atlanta. The Atlanta Black Crackers was a Negro League baseball team from the early part of the 2oth Century –  user3847 Sep 1 at 3:18

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The Online Etymology Dictionary traces the slur cracker “poor, white trash” either to crack “to boast” or to corn-cracker “poor white farmer.” The latter derivation is essentially the same as your grandmother's, except that the staple food of poor farmers was cracked corn, not crackers. Wikipedia notes both of those theories, plus two more related to whip-cracking (cowboys and slave drivers). Except for the cracker cowboy theory, all of them have reasonable 18c. & 19c. sources, but the “boast” theory seems oldest and most credible.

Much like N-word privileges, cracker can be a proud self-description, a dire insult, or anything in between – so it's best to avoid the word unless you're certain that you're in the privileged group, with an audience that sees things the same way, and even then you can expect some criticism from outsiders. The word seems most acceptable in Georgia and Florida, especially in the phrases Georgia cracker and Florida cracker.

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Very interesting (and funny) question to me because growing up I had lots of African American friends who commonly used the opposite term (n-word) to refer to each other, and even me (a white guy), and me and many of my other white ("Caucasian", to be politically correct) friends would call each other "crackers".

I don't know that I ever thought very much about what it meant, but I think I assumed that it meant you were white or pale like a saltine cracker. We just used it jokingly, usually in good fun, and never in any pejorative sense.

But I know many people, esp people with a prejudice against Caucasians, use it in an intentionally pejorative manner.

I think I have personally always just found the term to be quite hilarious. I'll even call my wife "Cracker" now and again just to get a smile out of her.

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Like many words, the definition depends upon the intent and inflexion of the user. Many Georgians were proud to call themselves "Georgia Crackers" who took the name from their ancestors who drove their cattle (cracking whips) south to Florida grasslands. That is the popular etymology among White rural Georgians, according to my late father who was born in the small town of Adrian, Georgia. He also pointed out that Atlanta's long-time minor league team was called the "Atlanta Crackers."

The New Georgia Encyclopedia says that the derivation is more complicated. It says that linguists trace the word to the Gaelic word craic which is still used in Ireland to describe entertaining conversation. In Elizabethian English, the word cracker meant braggert. Shakespeare's King John (1595) includes the statement: "What cracker is this . . . that deafes our ears / With this abundance of superfluous breath?" By 1760 the English, both in Colonial America and in Great Britain were using the word cracker to describe the Scot-Irish settlers in the back-country of the Southern American colonies. The Earl of Dartmouth received this report of the new settlers: "I should explain to your Lordship what is meant by Crackers; a name they have got from being great boasters; they are a lawless set of rascalls on the frontiers of Virginia, Maryland, the Carolinas, and Georgia, who often change their places of abode."

African-Americans, however, shifted the meaning from positive to one of derision. Malcom X, in his speach "The Ballot or the Bullet," said "It's time for you and me to stop sitting in this country, letting some cracker senators, Northern crackers and Southern crackers, sit there in Washington, D.C., and come to a conclusion in their mind that you and I are supposed to have civil rights. There's no white man going to tell me anything about my rights." And, of course, in this famous Saturday Night Live skit with Chevy Chase and the late Richard Pryor applying a word-association test to racial epithets, "cracker!" was Pryor's comeback to "burr-head," and ranked just below "white trash," "honkey," "honkey-honkey" and "dead honkey" on Pryor's list of perjorative expressions for whites.

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Here in the mid-west I know the term as derogatory to white people from African Americans. I was called a "cracker" by an African American woman, while I was working with my African American friend. I asked him what that meant, he said it was the N word for white people.

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In Britain, describing someone as crackers is suggesting that they are slightly 'mad' / wacky / weird. Depending on the manner in which it is said, it is often not particularly derogatory, but can be used in a slightly derogatory fashion. I know of no British usage of it as a noun in reference to people.

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Cracker is an Americanism, very roughly equivalent to chav. –  Malvolio May 24 '13 at 14:01
    
@Malvolio the user made it perfectly clear the meaning of cracker in common BrEng. I can confirm that TrevorD's answer is 100% accurate, and contributes towards understanding the history behind cracker as mentioned in the OP's question. –  Mari-Lou A Sep 1 at 5:23

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