When this cycle is broken, the deities become arrogant and self-centered, losing their balance. The mortals, on the other hand, begin fighting for the scraps of magical power that the gods have left in the physical world, creating a system of temples led by “enlightened” priests.
The magical system of the world is based on emotions, and this applies both to mortals and immortal deities. While all immortals can use the power equally, the able magic-users of the physical persuasion have become scarce and split by the way they are able to manifest their power. Some can relive emotions from books and notes they read, and pour them into liquid form, becoming alchemists. Others do not need the help of written material and can encase emotions into items, creating enchantments. The rarest and most powerful are able to channel their emotions directly, creating the magical effects that the gods themselves are able to produce.
Politics are not very complicated in the world. Several prosperous city-states exist, each content with the way it runs its own area. Each city is run by a local guild or temple, and a self-imposed balance of power keeps all of them in place.
Unless an ancient source of magical power resurfaces, and all the temples desire it above all else. Then you have a legendary mess on your hands.