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My takes this; literal Neo-Nazis do exist, and are obviously bad.

But when we overuse the term by labelling everything and everyone "Nazi" it waters down just how evil actual Nazism really is, which in turn normalizes it and makes it more palatable. 

If you tell people that something as innocuous as an ad about a sexy white woman having great genes is "Nazi propaganda" then people won't take you seriously when actual Neo-Nazis crop up, or worse they'll think "well, if a sexy woman is Nazism, maybe Nazism's not so bad".