Oh dear. How long was this dog in the pound? Many dogs - like people - can develop neurotic habits like spinning, chewing themselves, overgrooming, etc. when stressed.
How old is she and how much exercise is she getting? Has something changed in your home - new pet, work/school schedules..?
I would take her to the vet - she may need some meds to get her over this destructive habit. This is quite serious, as she could damage her tail to the point where it could need amputation.