Peel potatoes and slice paper thin. Saute bacon slowly in a frypan, then drain on paper towels. Saute onion in bacon fat until golden brown. Blend in flour, sugar, salt, celery seeds, and pepper. Cook over low heat, stirring until smooth and bubbly. Remove from heat. Stir in water and vinegar. Heat to boiling, stirring constantly. Boil for 1 minute. Carefully stir in the potatoes and crumbled bacon bits. Remove from heat, cover and let stand until ready to serve.