Is fractional-reserve banking theft?

If we use a conventional definition, "fractional-reserve banking is a type of banking whereby the bank does not retain all of the customers deposits within the bank. Funds received by the bank are generally lent to other customers."

If we use the conventional definition of theft, it is the "illegal taking of another person's property without freely-given consent."

So what's the relationship between the two?

When a bank lends the same money that is also deposited, the deposit exists as currency and the lent money exists as currency at the same time. This process is compounded. The person that borrows the money either deposits it or spends it (so the money gets deposited again), and the money can be lent again. This has the effect of creating money.

To be exact, in many countries this monetary inflation (as opposed to price inflation), is at about 5% (I don't know this for all countries, but I do think it is about this for Canada) and often greater.

What does this mean though and how does it relate to theft? I'll give you a hint. If you had a hundred dollars in your pocket, and someone were to come up to you and took five dollars without your consent, would you not consider it theft?

That's very close to what actually happens. The best description I've seen of what our modern currencies are is a collective debt instrument. To simplify (and perhaps poorly interpret), a currency is like the sum total of all goods and services in exchange.

When a bank lends money that is also a deposit, they increase the money that represents the same "sum total of all goods and services in exchange". To give a simple example, imagine all the goods is just three carrots. Imagine also that there are three dollars as currency. As a carrot producer, you expect to be able to sell the three carrots for three dollars. But then comes a banker and lends two of the three dollars to someone. Suddenly there is five dollars in your money supply. You could continue to sell your carrots for three dollars, but it's more likely that you'll want a bit more, since those five dollars represent the same amount of goods in exchange.

In this manner, fractional-reserve lending makes each dollar buy less - each dollar in your pocket or in your paycheck. What it means is that it is money out of your pocket, exactly as if someone came up to you on the street and took it.

The question now is whether that money is taken legally or illegally.

I would say that it's up to lawyers to argue if it is legal. I just don't know.

If it is legal, then it amounts to a tax. A taxation without representation.

If it is not legal, then it is theft.