Cause

It is clear from these 2 discussions below that Type 2 Diabetes is initially caused by fat deposits in the liver and muscle cells thus preventing the entry of glucose.

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So where does this fat come from?

In the last several thousand years man has adopted a high carbohydrate diet and have thus gone from primarily fat burning to glucose burning. The excess glucose in our diet is converted to long-chain saturated fat (the sticky fat)  by the liver in a process called De Novo Lipogenesis (Udo Erasmus - 'Fat the Heals, Fat that Kills'). The fat is stored in the liver and muscle cells. Eventually all the fat that is produced from the excess glucose completely fills the cell and prevents glucose from being able to enter. The glucose thus accumulates in the blood, and so the pancreas has to produce more insulin in an effort to deal with the increasing blood glucose.

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This is a viscous cycle.  Since the glucose has not been able to enter the cells, the satiety signal won't have been sent to our brain. We thus still have the desire to eat. The liver, trying to deal with all the extra glucose converts some to fat and is further pushed into cells. This further prevents glucose from entering the cells and thus requires more insulin to be produced.

This is also why we put on extra weight in the form of visceral fat.

Cure

The cure is to go on a Ketogenic diet (see 'The Truth About...'). This is a high healthy fat, low carbohydrate, and low animal protein diet. This has the effect of changing us from a primarily glucose burning machine to a fat burning machine, thus we will become fat adapted. Our ancient ancestors always burnt fat as their primary energy source but with our adoption of a high carb diet, we have lost our ability to burn fat. 

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Renewing this ability allows us to burn the accumulated fat in our liver, pancreas and muscle cells, and thus will allow insulin to do its job of pushing glucose into the cell. 

Another way to burn this accumulated fat is to fast. A water fast over 2 or 3 days will force the body to go into fat burning mode and to burn accumulated fat for its energy requirements. We should still, however, continue on a low carbohydrate diet since a high carb diet will again elevate glucose and thus fat, which again will be deposited in the cells, thus restarting the process.