We have a municipal bond crisis in Chicago: Advisor

As Chicago's municipal bonds continue to be downgraded by credit rating agencies, Sitka Pacific Capital Management's Mike "Mish" Shedlock, said something has to be done on the political level.

"We have a municipal bond crisis on our hands here in Chicago," he said in an interview on Tuesday on CNBC's "Squawk on the Street." (Tweet this)

The city's unfunded pension liabilities as well as liquidity problems have led to a series of recent downgrades. In addition, a recent ruling by the Illinois state Supreme Court has determined pension reform to be unconstitutional.

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"The Illinois legislature could, and should in my opinion, pass a law allowing municipalities to go bankrupt," Shedlock said. "That is actually what Gov. [Bruce] Rauner wants the Chicago Board of Education to do, but of course Mayor Rahm Emanuel doesn't want that at all."

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