This is an atypical formation of a pejorative.

We recognize the "slur": consider any racial slur.
When used by someone outside the target group,
it is an external slur, and generally pejorative.

Many groups co-opt the slur for internal use,
thus forming an internal slur, dis-empowering the
word, and eventually "owning" the word.

The word "thug" is not an external slur. It is a
term used in a sub-culture. It does have a different
meaning in that sub-culture, but to call some one
racist because they aren't hip to the latest slang is
ridiculous.

Several other points to be made.
1) The etymology of "thug" does show a racist tinge, but
it is a slur against Hindus by association. Of course, it
generalized to the meaning encountered.

2) Words will ALWAYS mean different things to different people.

Is "greaser" a racist term, or a descriptor somebody likely to have a spare
Lucky Strike .

This is part of the progressive PC.

Soon any word that carries a possible negative meaning will be considered racist or offensive, and this will end the ability of people to voice disapproval of anyone or anything.

I find this whole discussion quite interesting. The reason I feel that this term is not racist has to do with the origins of the term. Unlike the N-Word, which was a racial epithet from the beginning, the term thug actually originated in 19th century India. It was used to describe a group of cult-like robbers/murders, who I believe were called the Thuggee cult. However, this is not to say that Thug cannot be used in a racist way. Just like the terms "boy", or "you people", I feel thug could have racial connotations in a given situation, but is not a racist term in and of itself. And while the term thug may have been co-opted by a relatively small group of rappers/ talk radio hosts, I feel that the hundreds of years of linguistic history, not to mention the fact that the vast majority of people worldwide do not associate it the term with race, would counsel us against considering the term "thug" to be inherently racist in nature. But, ultimately these issues are decided by the individual being spoken to, so know your audience!

My initial reaction was your friend is just a bit ignorant. But upon closer examination I've decided that she is, instead... racist! For some reason she associates the word "thug" with African American. Worse still, I infer that she associates it with young African American men (the "rapper" demographic). So she so believes that a pejorative term is so identifiable with her preconceived idea of the stereotypical young Black man that she insists it is a slur. Blatant racism - and sexist too.

The world has a long and proud history of thuggery, including such luminaries as Al Capone (the consummate Chicago thug), Mussolini, the KKK, some of those PC Police, and most of the reactionary neocon fanatics. And if I dare say, there's a new breed of thug hell-bent to steal some of our best vocabulary because they won't take the time to actually learn what specific words actually mean.

The racial slur assertion is absurd; use the link below to see an excellent explanation of the origins of the word:

http://en.wikipedia.org/wiki/Thuggee