In the lyrics of Friends Will Be Friends by Queen:
Another red letter day
So the pound has dropped and the children are creating.
What does the phrase highlighted in bold mean?
Queen is a British band, and this usage of the intransitive create is British colloquial for "create a fuss", "make noise", or nearly, as ukayer says, "create havoc". The Compact Oxford Dictionary has this:
The Collins English Dictionary — Complete and Unabridged also has this:
See also this post by lynneguist on Separated By a Common Language, where I first encountred the term. It's used mostly for little children (or those considered little children), rather than adults.