Goals from Thomas Muller, Miroslav Klose, Sami Khedira and two from Toni Kroos gave Germany a shock 5-0 lead at half-time, before Andre Schurrle added two more, leaving Oscar's late strike nothing more than a consolation.
Kahn feels Brazil collectively failed as the Europeans tore them apart and has criticised head coach Luiz Felipe Scolari for his naive tactics.
"Brazil collectively imploded. It was complete failure from the entire team right from the start until the very end," Kahn told ZDF.
"The Brazilians did everything wrong from a tactical point of view. It was incredible to see how they just walked into Germany's trap. They completely fell apart after the opening goal.
"I don't know whether it was the pressure that got to Brazil and whether the burden was too much for them. But they clearly didn't know how to cope with everything.
"Brazil were very vulnerable emotionally and lacked experience."
Brazil will meet either Argentina or Netherlands in Saturday's third-place play-off in Brasilia.