He said it's “strange” the club gave Klopp a new six-year contract last summer, saying the Reds will not finish in the top four.
Klopp was appointed on a three-year deal in October 2015, and was handed the new deal in July after Liverpool had ended first season eighth in the Premier League and reached the English League Cup and Europa League finals.
Hamann said the deal was “absolute madness,” adding that, “They [Liverpool] won't win anything this year and they may not finish top four.”
The 2-0 loss to Hull City on Saturday means Klopp has now lost five of his last eight games in all competitions.
Hamann, who won the Champions League with Liverpool in 2005, added, “I found it strange in the summer I've got to say because, if you look at the pure facts, Jurgen Klopp came in and I think he changed the perception in the city and the football club.
“He gave them common sense and he made an impact when he came in, but if you look at the pure facts I don't think the points average has improved dramatically since Brendan Rodgers.
“You get to two finals, you lose two finals. I think they both should and could have won — especially the second one against Sevilla [in the Europa League].
“That would have had a huge impact as they would have been in the Champions League. They have probably made a decision with their heart and not their head by extending the contract by another four years”, He said.