The term "Muggle" has existed for a while. It used to be this insult.
In the Harry Potter world, a muggle is someone who wasn't born with any magical powers and wasn't born in the magical realm.
J.K. Rowling said she got the term from British slang "mug" which means "an easily fooled person."
An article from 1931 in Time magazine said that prison authorities found "muggle smuggling a perplexing problem."
Back then, muggle was a term for marijuana.