"Crazy" and similar terms ("mad," "insane") as epithets for something or someone that seems far beyond the reasonable is probably as old as language itself.  The idiom can be found many times in  Greek tragedy.  I assume it's in the Bible, but I haven't specifically looked for it. It's in the Quran.  It's in Shakespeare and Milton.  In modern discourse, it's commonplace to call Hitler "insane" (which he wasn't in any clinical sense, except possibly for Parkinsonism).  

While Kennedy is right that people suffering from mental illness should not be associated with an idiom of opprobrium, the fact is that "crazy" and its synonyms have no scientific or clinical meaning.  They are popularly understood in a non-clinical sense.  While the "Political Correctness" meme is a poisonous one, it's possible to be ridiculous in our desire to sterilize ordinary language--which is, wonderfully, as various and unpredictable as people themselves are.