Each job/noble class will have three pressures on it: emulate the fashion of those above it, one-up it's peers, and stay ahead of the lower classes. The ability for a given individual to be able to respond to these pressures is limited by purchasing power, and need to dress for the environment.
Just want to add that even if you are a noble, how rich you are doesn't affect your position.
So a baron could have more cash then a king, yet still be a baron.
The reason why I mention this is because in history this annoyed the heck out of kings, which led to laws regulating what each layer of nobility was allowed to wear or even had to wear(For example, Marie-Antoinette was actually dressed rather sober for a queen of France. She even got a lot of flak for that). As in your example of the loin-cloth king, it would be the king changing the laws rather then the nobility actively emulating. In fact, the nobility would actually ridicule the king, though probly behind his back. After all, even the most autocratic of kings are only powerful because their subjects wish to follow them.
What also can happen is that said king in question would be given the extra pieces of clothing as a gift from friends or loyal subjects, because they wish to uphold the image of their king/friend.
My point is, trends don't really start at their climax, and medieval kings aren't as infallible as people seem to think they are.