2 - 1873: The long depression

The first deflationary crash occurred in 1835 – 1842.

The first distinguished boom and burst phenomenon has to be dated back to late 19 century. In midst of a prolonged growth during the industry revolution, America and German were the rising star compared with the traditional super power such as France and Briton. However, such a sustained the growth was abruptly ended in May 1873.
The primary cause of the depression was a shortage of available money to facilitate trade. The most immediate cause, and the date that is often used as the start of the Depression, was the collapse of the Vienna Stock Exchange on May 9, 1873. Others have argued the depression was rooted in the 1870 Franco-Prussian War that hurt the French economy and, under the Treaty of Frankfurt (1871), forced that country to make large war reparations payments to Germany. The price of silver started to fall causing considerable losses of asset values.
In America the speculative nature of financing due to both the greenback which was specie issued to pay for the US Civil War and rampant fraud in the building of the Union Pacific Railway up to 1869 culminated in the Credit Mobilier panic. Railway overbuilding and weak markets collapsed the bubble in 1873. Both the Union Pacific and the Northern Pacific lines were centre in the collapse; another railway bubble was the UK railway mania. (the modern dotcom bubble of 2001 is very similar).
Because of the Panic of 1873, governments depegged their currencies, to save money. The demonetization of silver by European and North American governments in the early 1870s was certainly a contributing factor. The Coinage Act of 1873 in America was met with great opposition by farmers and miners, as silver was seen as more of a monetary benefit to rural areas than to banks in big cities. In addition, there were Americans who advocated the continuance of government-issued fiat money (United States Notes) to avoid deflation and promote trade. The western US states were outraged--Nevada, Colorado, and Idaho were huge silver producers with productive mines and for a few years mining abated. The resumption of the US government buying silver was enacted in 1890 with the Sherman Silver Purchase Act.
Some economic historian believes that the current crisis bear striking similarity with the long depression in 1873. It lasted almost 10 years.

Similarities to 2008: Economic historian Scott Reynolds Nelson believes the parallels are striking—it started with a housing bubble which popped and generated a mortgage crisis. Financial markets fell apart when investors, relying on complex financial instruments, did not consider counter-party risk. He explains the origins of the crisis:
The problems had emerged around 1870, starting in Europe. In the Austro-Hungarian Empire, formed in 1867, in the states unified by Prussia into the German empire, and in France, the emperors supported a flowering of new lending institutions that issued mortgages for municipal and residential construction, especially in the capitals of Vienna, Berlin, and Paris. Mortgages were easier to obtain than before, and a building boom commenced. Land values seemed to climb and climb; borrowers ravenously assumed more and more credit, using unbuilt or half-built houses as collateral. The most marvelous spots for sightseers in the three cities today are the magisterial buildings erected in the so-called founder period.
Even in the 1870s a financial crisis could not be contained within borders. It was not long before it spread to the fledgling American economy.
As continental banks tumbled, British banks held back their capital, unsure of which institutions were most involved in the mortgage crisis. The cost to borrow money from another bank — the interbank lending rate — reached impossibly high rates. This banking crisis hit the United States in the fall of 1873. Railroad companies tumbled first. They had crafted complex financial instruments that promised a fixed return, though few understood the underlying object that was guaranteed to investors in case of default. (Answer: nothing). The bonds had sold well at first, but they had tumbled after 1871 as investors began to doubt their value, prices weakened, and many railroads took on short-term bank loans to continue laying track. Then, as short-term lending rates skyrocketed across the Atlantic in 1873, the railroads were in trouble. When the railroad financier Jay Cooke proved unable to pay off his debts, the stock market crashed in September, closing hundreds of banks over the next three years. The panic continued for more than four years in the United States and for nearly six years in Europe.
This sounds eerily familiar, and terrifying. Mr Nelson describes the contraction that followed as being more severe and causing more social unrest than the Great Depression. He even believes the financial hardship that followed is what spawned a wave of American religious fundamentalism. The 1873 crisis also provided ample financial opportunities for the few with cash. The robber barons of the day—the Rockefellers and Carnegies—bought under-valued assets in the depressed market. As markets recovered, inequality grew and gave rise to the subsequent gilded age in America. Abroad, where the mortgage crisis began, it spelled the end of the economic dominance of the Austro-Hungarian Empire.