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From Snopes:

One has to wonder at the workings of the mind of someone who'd invent this spurious "pick a nigger" derivation and then set it loose on the Internet. Of course, the fact that it's spurious hasn't deterred those who are determined to find something to be offended by, as noted in this excerpt from a 2000 National Post article:
Meanwhile, things are not peachy on the campus of SUNY/Albany. The university wanted to honour baseball legend Jackie Robinson by having a picnic. But the university's equity office said this must not occur because the word "picnic" referred originally to gatherings held to lynch Blacks. In fact, as one of their own English professors (rather less committed to historical revisionism than RMC's Dr. Robinson) pointed out, the word "picnic" actually comes from a 17th-century French word that denotes a party at which everyone brings food. But Zaheer Mustafa, the equity officer, nevertheless decreed that "picnic" not be used because "the point is — the word offends." So the university decided to call it an "outing." Then, homosexual students took objection to that, and SUNY decided to publicize the event without using any noun to describe it.

Note that the implication in Snopes is that the whole thing was made up in order to make blacks look stupid for believing such a ridiculous thing. I think, though, that I read about this in Higher Superstition: The Academic Left and Its Quarrels with Science in the section about the Afrocentrism movement. And there were plenty of equally, if not more so, ridiculous things described there being actively promoted by race-baiting black professors.

Remember the story about the University of Michigan describing a South African photographer's exhibit about black South Africans as being about "African-American South Africans"? Or CNN's Carol Lin referring to two apparently black teenagers who were French citizens of Tunisian descent in this way: "...it’s been 11 days since two African-American teenagers were killed, electrocuted during a police chase, which prompted all of this.”

There is nothing like the idiocy of the Left.