It sounds like an episode from the version of _The Mysterious Stranger
published as _The Mysterious Stranger_ in 1916 but now generally called _The
Chronicle of Young Satan_, in which Philip Traum (the Stranger) gives
Nikiolaus the power to create creatures (birds, small people) from mud and
destroy the people when they begin behaving like full-scale human beings.
John H. Davis, Ph.D.