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In a large skillet, fry the bacon until crisp; remove and set aside.
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Drain all but 2 tablespoons of drippings; cook onion until tender. Stir in the flour and blend well.
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Add the vinegar and water and cook and stir until bubbly and slightly thick. Add the sugar and stir until it dissolves.
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Crumble the bacon. Gently stir in the bacon and potatoes.