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Throughout his works, Nietzsche conveys great praise for the Jewish people. However, he obviously does not admire the consequences of their accomplishments. In the first essay of On the Genealogy of Morals, section 7, he asserts:

All that has been done on earth against "the noble," "the powerful," "the masters," "the rulers," fades into nothing compared with what the Jews have done against them; the Jews, that priestly people, who in opposing their enemies and conquerors were ultimately satisfied with nothing less than a radical revaluation of their enemies' values, that is to say, an act of the most spiritual revenge...

With the Jews there begins the slave revolt in morality: that revolt which has a history of two thousand years behind and and which we no longer see because it - has been victorious.

It is well known that Nietzsche despises the effects of slave morality and the priestly-aristocracy - the inversion of values it brings; how it renders men "impotent"; how it reduces the end of life into "nothingness." (reference section 6).

What, then, leads him to praise the Jews as such?

The Jews, on the contrary [to Rome], were the priestly nation of ressentiment par excellence, in whom there dwelt an unequaled popular-moral genius: one only has to compare similarly gifted nations - the Chinese or the Germans, for instance - with the Jews, to sense which is of the first and which of the fifth rank.

It seems to me that this has something to do with "popular-moral genius," but what does this mean? Is Nietzsche praising them because they have the talent to control the masses with their slave morality? Would he perhaps have been very happy to see their talents used not as the reactive men of ressentiment, but as the active, aggressive noble men?

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In passing, two things strike me immediately here: (a) he seems to be noting the exemplary "moral genius" of the Jewish people; and at one point he states he admires the specific model of church or temple (which Nietzsche says somewhere is the "noblest" kind of institution, moreso than the state for instance); (b) he also expresses an admiration for the literature of the Old Testament, where Nietzsche says we are introduced to "a people" -- something near-absent in the New (at one point he says it is the greatest sin on Europe's literary conscience to have adjoined the two books) –  Joseph Weissman Mar 25 '12 at 17:39
    
@JosephWeissman Ah, yes, I definitely remember your latter point; Beyond Good and Evil, I think? Maybe I'll mention that if I can find it. –  commando Mar 25 '12 at 17:49
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If anybody is wondering, the section Joseph mentioned about the Old and New Testament is section 52 of Beyond Good and Evil. I couldn't really find a way to fit it into the question, but you may find it useful to answer. –  commando Mar 25 '12 at 20:42

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There's a passage in The Gay Science (136) that may help to illuminate what Nietzsche means by referring to the moral genius of the Jews. He states their genius consists of a "more profound contempt for the human being in themselves than any other people." Also, later (in 140), Nietzsche regards Jesus as "not refined enough...being a Jew" to undertand that a God that is an arbiter of justice is not an object of love. I suppose that Nietzsche in one sense admires the Jews insofar as they are not as hypocritical as he deems Christians.

My understanding of Nietzsche's view on Judaism is influenced in large part by Walter Kaufman's insightful annotations and suggested cross references. He reminds the reader to recall the historical context of Nietzsche's comments:

...some of Nietzsche's comments on Jews... are bound to strike many of today's readers very differently from they way they struck - and were meant to strike - Victorian readers. The modern reader is apt to find evidence of anti-Semitism where Victorian readers were shocked by the suggestion that Jesus was considered a Jew not only in name... in The Antichrist: Jesus and Christianity were "Jewish" precisely in the sense in which nineteenth-century Christians used to look down on what was "Jewish."

Kaufman then goes on to suggest referencing 248, 250, and 251 in Beyond Good and Evil as well as 135 and 140 in The Gay Science.

Also, later in The Gay Science (348) I found a passage on scholarship in which Nietzsche expresses his belief that Jews hold "a high regard for logic" and that "Europe owes the Jews no small thanks for making people think more logically, and for establishing cleanlier intellectual habits." He goes on:

Wherever Jews have won influence they have taught men to make finer distinctions, more rigorous inferences, and to write in a more luminous and cleanly fashion; their task was ever to bring a people "to listen to raison."

Although this has less to do with any sense of moral genius, it still shows a respect or admiration, perhaps, by Nietzsche for Jews.

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It most certainly does not. The passage in question were showing that Jews are responsible for Christianity. You are conflating the admiration he has for individual Jews with the contempt he has for what he considers the Jewish religion corrupting the world with philosophy of weakness. He admires certain "national characteristics" of Jews (traits which exist only in his head) only to affirm the conceit that it is the Jewish influence which is holding the superior people back with Christianity. Jews are not responsible for Christianity. One should read Nietzsche honestly, not make apologia. –  Ron Maimon Apr 12 '12 at 8:04

I will try to explain what Neitzsche is saying about Jews using some selections from his work. My previous answers were deleted, and I opened a meta-discussion about them: here and here.

I will only leave the relevant passages this time: Walter Kaufmann, translation, p. 68:

Today when suffering is always brought forward as the principle argument against existence, as the worst question mark, one does well to recall the ages in which the opposite opinion prevailed because me were unwilling to refrain from making suffer (sic in translation) and saw in it an enchantment of the first order, a genuine seduction to life.

Perhaps in those days--- the delicate might be comforted by this thought--- pain did not hurt as much as it does now; at least that is the conclusion a doctor may arrive at who has treated Negroes (taken as representatives of prehistoric man) for severe internal inflammations that would drive even the best constituted European to distraction--- in the case of Negroes they do not do so. (The curve of human susceptibility to pain seems in fact to take an extraordinary and almost sudden drop as soon as one has passed the upper ten thousand or ten million of the top stratum of culture; and for my own part, i have no doubt that the combined suffering of all the animals ever subjected to the knife for scientific ends is utterly negligible compared with one painful night of a single hysterical bluestocking.)...

Next let us move to page 30

The Latin malus (beside which I set melas) may designate the common man as the dark-colored, above all as the black-haired man ("hic niger est") as the pre-Aryan occupant of the soil of Italy, who was distinguished most obviously from the blond, that is Aryan, conqueror race by his color; Gaelic at any rate, offecs us a precisely similar case--- fin (for example in the name Fin-Gal), the distinguishing word for nobility, finally for the good, noble, pure, originally meant the blond-headed, in contradistinction to the dark, black-haired aboriginal inhabitants.

The Celts, by the way, were definitely a blond race; it is wrong to associate traces of an essentially dark-haired people which appear on the more careful ethnographical maps of Germany with any sort of Celtic origin or blood-mixture as Virchow still does: it is rather the pre-Aryan people of Germany who emerge in these places (the same is true of virtually all Europe: the suppressed race has gradually recovered the upper hand again, in coloring, shortness of skull, perhaps even in the intellectual and social instincts: who can say whether modern democracy, even more modern anarchism and especially that inclination for "commune" for the most primitive form of society, which is now shared by all the socialists of Europe, does not signify in the main a tremendous counterattack--- and that the conqueror and master race, the Aryan, is not succumbing physiologically, too

The Jew appears on pages 33-34, regarding the slave revolt:

... The knightly-aristocratic value judgements presupposed a powerful physicality, a flourishing, abundent, even overflowing, health, together with that which serves to preserve it: war, adventure, hunting, dancing, war games, and in general, all that involves vigorous free joyful activity.

As is well known, the priests are the most evil enemies --- but why? Because they are the most impotent. It is because of their impotence that in them hatred grows to monstrous and uncanny proportions, to the most spiritual and poisonous kind of hatred. The truly great haters in world history have been priests; likewise the most ingenious haters: other kinds of spirit hardly come into conservation when compared with the spirt of priestly vengefulness. Human history would be altogether too stupid a thing without the spirit that the impotent have introduced into it--- let us take at once the most notable example. all that has been done on earth against "the noble", "the powerful", "the masters", "the rulers" fades into nothing compared with what the Jews have done against them; the Jews, that priestly people, who in opposing their enemies and conquerors were ultimately satisfied with nothing less than a radical revaluation of their enemies' values, that is to say, an act of the most spiritual revenge. For this alone was appropriate to a priestly people, the people embodying the most deeply repressed priestly vengefulness. It was the Jews, who with awe-inspiring consistency, dared to invert the aristocratic value-equation (good=noble=powerful=beautiful=happy=beloved of God) and to hang on to this inversion with their teeth, the teeth of the most abysmal hatred (the hatred of impotence) saying "the wretched alone are the good; the poor, importent, lowly alone are the good; the suffering, deprived sick, ugly alone are pious, alone are blessed by God, blessedness is for them alone--- and you, the powerful and noble, are on the contrary the evil, the cruel, the lustful, the insatiable, the accursed, and the damned!"

The inversion of morality is attributed to the Jews, but the words are of Jesus' sermon on the mount. The attribution of "priestly" qualities to Jews is in no way any sort of praise. It makes them:

If you read this passage, it answers your question. I will not say anything more, as everything I said about this so far has been deleted and censored.

I will say that the persistence of Nietzsche (and Heidegger) in classrooms is a stain on philosophy, and the field is damned to irrelevance as long as they are taught or respected.

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