Interesting topic, OP, but i disagree with your theory. For me, the explanation is in the overall decline of the western culture, and the mutually related slides into barbarism and decadence. Since the US leads the decline, the trend towards ridiculousness is the most pronunced.
Decadence, because it is now an end in itself to possess the most extravagantly elaborate, rare, artisanal, or expensive articles of clothing. Barbarism, because dressing is no longer dressing, but piling on of idols and lucky charms to signify virility and status. There is no inherent difference between red cashmere socks and a huge bone stuck through your nose.
Basically, the status anxiety and striving already mentioned by Foo and others are real, I simply mean that they are far more real, vulgar, and intense than anyone likes to admit.
I guess that's what we get when we pretendeth too much that class warfare does not and should not exist. In fact, we need more of it. Maybe then we'll see some genuine style, rather than pathetic and meek attempts to conquer upper class style by perverting whatever good is left of it. (and I am beginning to think that there is not much there to begin with - why would we consciously want to identify with the coat and tie outfit? The uniform of the most ruthless group of people to ever exist on earth, the ones that colonized, brutalized, exploited, and killed millions of people - and continue to do so to this day, always in a suit and tie. The only difference is that the real heavy hitters rarely care how the suit fits. )
Yep, that's what the suit and tie is all about.
The ridiculous sprezzatura comes a bit later, perhaps also out of guilt and denial. As if painting a tank baby blue changes the fact that it is primarily a tool for destruction and domination:slayer:Edited by SamSpade - 8/9/12 at 6:59am